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We are evaluating a project that costs $897,000, has a life of thirteen years, and has no salvage value. Assume that depreciation is straight-line
We are evaluating a project that costs $897,000, has a life of thirteen years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $39, variable cost per unit is $26, and fixed costs are $915,837 per year. The tax rate is 25 percent, and we require a return of 14 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 19 percent. a. Calculate the best-case NPV. Best case b. Calculate the worst-case NPV. Worst case
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SOLUTION To calculate the bestcase and worstcase net present value NPV for the project we need to estimate the cash flows for each case and discount them back to the present value using the required r...Get Instant Access to Expert-Tailored Solutions
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