Your firm is contemplating a capital investment in equipment that will enable a new product line. The equipment will cost $1,000,000 (payable today). The equipment will be depreciated straight line to $0 over the two year operating period. You believe that the equipment will have a $250,000 salvage value at the end of year 2. To start production, an upfront investment in net working capital of $50,000 will be required (assume full recovery at the end of the operating period). Assume a tax rate of 21% and a discount rate of 10%.

The potential scenarios for Sales Price per Unit, Cash Expenses per Unit, and Quantity Sold appear in the table below.

Worst-Case

Base-Case

Best-Case

Sales Price Per Unit

$11

$13

$14

Cash Expenses Per Unit

$4

$3

$2.75

Quantity Sold

90,000

100,000

110,000

Question 1: Calculate the NPVs for each scenario.