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Wendy and Wayne are evaluating a project that requires an initial investment of $886,000 in fixed assets. The project will last for eleven years, and
Wendy and Wayne are evaluating a project that requires an initial investment of $886,000 in fixed assets. The project will last for eleven years, and the assets have no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 91,000 units per year. Price per unit is $40, variable cost per unit is $21, and fixed costs are $886,886 per year. The tax rate is 35 percent, and the required annual return on this project is 19 percent. The projections given for price, quantity. variable costs, and fixed costs are all accurate to within +/14 percent. Required: (a) Calculate the best-case NPV. (Do not round your intermediate calculations.) (b) Calculate the worst-case NPV. (Do not round your intermediate calculations.)
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