Question
We are evaluating a project that costs $786,000, has an eight-year life, and has no salvage value. Assume the depreciation is straight-line to zero over
We are evaluating a project that costs $786,000, has an eight-year life, and has no salvage value. Assume the depreciation is straight-line to zero over the life of the project. Sale are projected at 65,000 units per year. Price per unit is $48, variable cost per unit is $25, and fixed costs are $725,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on the project. Suppose these projections given for price, quantity, variable costs, and fixed costs are all accurate within +- 10 percent. Calculate the base-cast, best-case, and worst-case NPV figures.
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