Question: Consider a project to supply Detroit with 2 5 , 0 0 0 tons of machine screws annually for automobile production. You will need an
Consider a project to supply Detroit with tons of machine screws annually for automobile production. You will need an initial $ investment in threading equipment to get the project started; the project will last for years. The accounting department estimates that annual fixed costs will be $ and that variable costs should be $ per ton; accounting will depreciate the initial fixed asset investment straightline to zero over the year project life. It also estimates a salvage value of $ after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $ per ton. The engineering department estimates you will need an initial net working capital investment of $ You require a return of percent and face a marginal tax rate of percent on this project.
a
What is the estimated OCF for this project? Do not round intermediate calculations and round your answer to the nearest whole number, eg
a
What is the estimated NPV for this project? Do not round intermediate calculations and round your answer to decimal places, eg
b
Suppose you believe that the accounting departments initial cost and salvage value projections are accurate only to within pm percent; the marketing departments price estimate is accurate only to within pm percent; and the engineering departments net working capital estimate is accurate only to within pm percent. What is the worstcase NPV for this project? The bestcase NPVA negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to decimal places, eg
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