Consider a project with a 4-year life. The initial cost to set up the project is $1,200,000. This amount is to be linearly depreciated to zero over the life of the project. You expect to sell the equipment for $240,000 after 4 years. The project requires an initial investment in net working capital of $120,000, which will be recouped at the end of the project.

You estimated sales of 77,000 units per year at a price of $137 each. The variable cost per unit is estimated to be $109.6 and fixed costs are $240,000 per year.

You expect unit sales, prices, variable and fixed costs to be within 15% of your estimates.

The required return is 16% and the tax rate is 34%.