Question: P11-6 Scenario Analysis [LO2] We are evaluating a project that costs $950,000, has a life of eight years, and has no salvage value. Assume that
P11-6 Scenario Analysis [LO2] We are evaluating a project that costs $950,000, has a life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 106,000 units per year. Price per unit is $42, variable cost per unit is $28, and fixed costs are $955,700 per year. The tax rate is 25 percent, and we require a return of 11 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 14 percent. a. Calculate the best-case NPV. Best case b. Calculate the worst-case NPV. Worst case
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
