Question
We are evaluating a project that costs $844,200, 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 $844,200, 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 80,000 units per year. Price per unit is $54, variable cost per unit is $38, and fixed costs are $760,000 per year. The tax rate is 23 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 15 percent. Calculate the best-case and worst-case NPV figures.
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