In the previous problem, suppose the projections given for price, quantity, variable costs, and fixed costs are
Question:
In the previous problem, suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures.
Data from Previous Problem
We are evaluating a project that costs $772,000, has an eight-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 96,000 units per year. Price per unit is $39, variable cost per unit is $21, and fixed costs are $1.35 million per year. The tax rate is 21 percent, and we require a return of 15 percent on this project.
Step by Step Answer:
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan