A company is analyzing an average-risk project, and the following data have been developed. Unit sales will be

constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable cost should

rise with inflation. The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be

no salvage value. What is the project's expected NPV?

Net investment cost (depreciablebasis) $200,000

Unitssold 60,000

Average price per unit, Year1 $28.00

Fixed op. cost excl. deprec.(constant) $150,000

Variable op. cost/unit, Year 1 $22.00

Annual depreciationrate 33.33%

Expected inflation rate peryear 7.00%

Taxrate 40.00%