The company also will increase sales of its cheap clubs by 11,400 sets. The cheap clubs sell for $415 and have variable costs of $145 per set. The fixed costs each year will be $9,300,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $28,700,000 and will be depreciated on a straight-line basis to a zero salvage value. The new clubs also will require an increase in net working capital of $2,320,000 that will be returned at the end of the project. The tax rate is 25 percent and the cost of capital is 12 percent.

    

Suppose you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs?

Answer rating: 100% (QA)

ANSWER To find the bestcase and worstcase NPVs we need to consider the potential range of values for ... View the full answer