Question: P11-6 Scenario Analysis [LO2] We are evaluating a project that costs $979,000, has an thirteen-year life, and has no salvage value. Assume that depreciation is
P11-6 Scenario Analysis [LO2] We are evaluating a project that costs $979,000, has an thirteen-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 121,000 units per year. Price per unit is $42, variable cost per unit is $28, and fixed costs are $983,895 per year. The tax rate is 31 percent, and we require a 19 percent return on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 20 percent. Required: (a) Calculate the best-case NPV. (b) Calculate the worst-case NPV.
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