Question: The most likely outcomes for a particular project are estimated as follows: Unit price: $70 Variable cost: $50 Fixed cost: $200,000 Expected sales: 35,000 units

The most likely outcomes for a particular project are estimated as follows: Unit price: $70 Variable cost: $50 Fixed cost: $200,000 Expected sales: 35,000 units per year However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.2 million, which will be depreciated straight-line over the project life to a final value of zero. The firms tax rate is 35% and the required rate of return is 12%.

What is the project NPV in best-case scenario, that is, assuming all variables take on best possible value?

What is the project NPV in the worst-case scenario?

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