ABC company is analyzing a new project with the following estimates: Sales quantity Lower Bound 9,500...

 

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ABC company is analyzing a new project with the following estimates: Sales quantity Lower Bound 9,500 Sales price per $9.75 Expected Value Upper Bound 10,000 10,500 $10.00 $10.25 unit Variable cost per $4.80 $5.20 $5.60 unit Fixed cost $15.000.00 $18,000.00 $21,000.00 Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% What is the net present value under the worst-case scenario? ABC company is analyzing a new project with the following estimates: Sales quantity Lower Bound 9,500 Sales price per $9.75 Expected Value Upper Bound 10,000 10,500 $10.00 $10.25 unit Variable cost per $4.80 $5.20 $5.60 unit Fixed cost $15.000.00 $18,000.00 $21,000.00 Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% What is the net present value under the worst-case scenario?

Answer rating: 100% (QA)

Answer To analyze the new project we can use the Expected Net Present Value ENPV method The ENPV is calculated by finding the present value of expecte... View the full answer