Question
We are evaluating a project that costs $822,600, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $822,600, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $53, variable cost per unit is $37, and fixed costs are $755,000 per year. The tax rate is 22 percent, and we require a return of 9 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 10 percent. Calculate the best-case and worst-case NPV figures.
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