Intro

Consider a project with a $4-$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 $14\%$ 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:

Part $1$

What is the NPV in the base case?

Try again

Part $2$

What is the NPV in the pessimistic case?

What is the NPV in the optimistic case?