PolarTech Inc. is considering the production of a new widget. The production equipment, costing $12 million, will will be depreciated over a six-year period. Upon full depreciation, the equipment's resale value is estimated at $2.5 million. The widget's retail price is $200, with an anticipated annual sales volume of 150,000 units. Fixed costs are projected at $900,000 annually, and variable costs amount to $15 per widget. Initial project startup requires a net working capital investment of $1,200,000. No additional working capital is required during the project. The applicable tax rate is 25%. Conducting a scenario analysis with cost of capital rates set at 6%, 10%, and 15%, calculate IRR and NPV for each scenario.

Answer rating: 100% (QA)

Scenario Analysis for PolarTechs Widget Project Heres the analysis for each scenario with different ... View the full answer