Question
We are evaluating a project that costs $884,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $884,000, has an eight-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 81,000 units per year. Price per unit is $59, variable cost per unit is $41, and fixed costs are $775,000 per year. The tax rate is 35%, and we require a 10% return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 10%.
Calculate the best-case and worst-case NPV figures.
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