You are estimating project cash flows. The base case is as follows: Unit price = $60; Variable
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Question:
You are estimating project cash flows. The base case is as follows: Unit price = $60; Variable costs = $28; Fixed costs = $400,000, and 30,000 units sold. Each of these variables can either be 10% higher or 10% lower than the base case. The initial investment in the project of $1,000,000 will not change with the economic environment and will be depreciated straight-line over the 10 year life of the project to a final value of zero. The tax rate is 20% and the discount rate is 12%.
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