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You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales:
You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows:
Expected sales: units per year
Unit price: $
Variable cost: $
Fixed cost: $
The project will last for years and requires an initial investment of $ million, which will be depreciated straightline over the project life to a final value of zero. The firms tax rate is and the required rate of return is
However, you recognize that some of these estimates are subject to error. Sales could fall below expectations for the life of the project and, if that happens, the unit price would probably be only $ The good news is that fixed costs could be as low as $ and variable costs would decline in proportion to sales.
a What is project NPV if all variables are as expected? Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to the nearest whole dollar amount.
b What is NPV in the worstcase scenario? Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to the nearest whole dollar amount. Negative amount should be indicated with a minus sign.
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