Problem $11-27$ Scenario Analysis $[$LO$2]$

Consider a project to supply Detroit with $28,000$ tons of machine screws annually for automobile production. You will need an initial $$5,800,000$ investment in threading equipment to get the project started; the project will last for $6$ years. The accounting department estimates that annual fixed costs will be $$1,400,000$ and that variable costs should be $$265$ per ton; accounting will depreciate the initial fixed asset investment straight$-$line to zero over the $6-$year project life. It also estimates a salvage value of $$775,000$ after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $$380$ per ton. The engineering department estimates you will need an initial net working capital investment of $$560,000.$ You require a return of $14$ percent and face a tax rate of $25$ percent on this project.

a$-1.$ What is the estimated OCF for this project? $($Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.)$

a$-$ What is the estimated NPV for this project? $($Do not round intermediate calculations

$2.$ and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ Suppose you believe that the accounting department's initial cost and salvage value projections are accurate only to within $\backslash$pm $5$ percent; the marketing department's price estimate is accurate only to within $\backslash$pm $10$ percent; and the engineering department's net working capital estimate is accurate only to within $\backslash$pm $15$ percent. What are your worstcase and best$-$case NPVs for this project? $($A negotive answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

$\backslash$table$[[$a$-1.$ OCF,$],[$a$-2.$ NPV$,],[$b$.$ Worst$-$case NPV$,],[$b$.$ Best$-$case NPV$,]]$