Tom is evaluating a project that costs $3,500,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 125,000 units per year, price per unit is $65, variable cost per unit is $40, and fixed costs are $2 million per year. The tax rate is 21%, and the required rate of return on the project is 10%.

Calculate the equivalent annual cost for the project. (Enter a positive value and round to 2 decimals)

Calculate the financial break-even number of units for the project. (Round to 2 decimals)

Suppose the price, units, VC per unit, and FC projections are accurate within +/-10%. Calculate the best case NPV.(Round 2 decimals)

Suppose the price, units, VC per unit, and FC projections are accurate within +/-10%. Calculate the worst-case NPV.(Round 2 decimals)

Answer rating: 100% (QA)

To calculate the equivalent annual cost for the project we need to consider the initial cost annual operating costs and the salvage value The initial cost of the project is 3500000 Since the project h... View the full answer