Question: A project under consideration costs $750,000, has a five-year life and has no salvage value. Depreciation is Straight-Line to zero. The Required Return is 17

A project under consideration costs $750,000, has a five-year life and has no salvage value. Depreciation is Straight-Line to zero. The Required Return is 17 percent, and the Tax Rate is 34 percent. Sales are projected at 500 units per year. Price per unit is $2,500, Variable Cost per unit is $1,500, and Fixed Costs are $200,000 per year.

It is estimated the unit sales, sales price, variable cost, and fixed cost projections given here are accurate to within 5 percent.

What are the upper and lower bounds for these projections?
What is the base-case NPV?
What are the best- and worst-case scenario NPVs?

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