Family Security is considering introducing tiny GPS trackers that can be inserted in the sole of a child's shoe, which would then allow for the tracking of that child if he or she was ever lost or abducted. The estimates, that might be off by

1010

percent (either above or below), associated with this new product are shown here:

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.

Since this is a new product line, you are not confident in your estimates and would like to know how well you will fare if your estimates on the items listed above are

1010

percent higher or

1010

percent lower than expected. Assume that this new product line will require an initial outlay of

$1.151.15

million, with no working capital investment, and will last for

1010

years, being depreciated down to zero using straight-line depreciation. In addition, the firm's required rate of return or cost of capital is

10.310.3

percent, and the firm's marginal tax rate is

3434

percent. Calculate the project's NPV under the "best-case scenario" (that is, use the high

estimateslong dashunit

price

1010

percent above expected, variable costs

1010

percent less than expected, fixed costs

1010

percent less than expected, and expected sales

1010

percent more than expected). Calculate the project's NPV under the "worst-case scenario."

Unit price:	$129129
Variable costs:	$7272
Fixed costs:	$255 comma 000255,000 per year
Expected sales:	10 comma 10010,100 per year