Consider a project with a 5-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 13% and the tax rate is 34%. You've collected the following estimates: Base case Pessimistic Optimistic Unit sales per year (Q) 8,000 6,000 10,000 Price per unit (P) 50 40 60 Variable cost per unit (VC) 20 35 15 Fixed costs per year (FC) 30,000 50,000 20,000

Attempt 3/5 for 10 pts. Part 1 What is the annual free cash flow in the base case?

Attempt 1/5 for 10 pts. Part 2 What is the NPV in the base case?

Attempt 1/5 for 10 pts. Part 3 What is the NPV in the pessimistic case?

Attempt 2/5 for 10 pts. Part 4 What is the NPV in the optimistic case?

Consider a project with a 6-year life. The initial cost to set up the project is $100,000. This amount is to be linearly depreciated to zero over the life of the project and there is no salvage value. The required return is 11% and the tax rate is 34%.

The price per unit is $50, variable costs are $20 per unit and fixed costs are $30,000 per year. You've collected the following estimates for unit sales:

	Base case	Pessimistic	Optimistic
Unit sales per year (Q)	7,000	5,000	9,000

Attempt 2/5 for 8 pts.

Part 1

What is the NPV in the base case?

Attempt 1/5 for 10 pts.

Part 2

What is the NPV in the pessimistic case?

Attempt 1/5 for 10 pts.

Part 3

What is the NPV in the optimistic case?