You, as the CFO of Windsor Co., are considering an investment of $420,000 in a machine with a CCA rate of 20% and a seven-year economic life. The appropriate discount rate is 13%, and the corporate tax rate for the company is 35%. Assume all revenues and expenses, which are presented below, are received, and paid in cash. Assets will remain in the CCA class after the project ends.

	Pessimistic	Expected	Optimistic
Unit sales	23,000	25,000	27,000
Price ($)	38	40	42
Variable costs per unit ($)	21	20	19
Fixed costs per year ($)	320,000	300,000	280,000

1. Calculate the NPV of project in each of the above scenarios
2. If each scenario is equally likely, is the machine a worthwhile investment?

Hello, In the Pessimistic Scenario, I was wondering why in your solution you haven't added the depreciation to obtain the yearly cash flows when taking into account the fixed cost. So the cash flows for year 1 to 7 would be (-8,450 + 84,000)=75,550. By doing so, the NPV would be as below NPV = -420,000 + PV ( PMT=75,550 ; N=7, I=13%) = -86,092.9123 Thanks,