Question: The most likely outcomes for a particular project project are estimated as follows: Unit Price $40 Variable Cost $20 Fixed Cost $350,000 Expected Sales 34,000
The most likely outcomes for a particular project project are estimated as follows:
| Unit Price | $40 |
| Variable Cost | $20 |
| Fixed Cost | $350,000 |
| Expected Sales | 34,000 units/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 depriciated straight line over the project life to a final value of zero. The firm's tax rate is 40% and the required rate of return is 10%.
A.) What is project NPV in the best case senario, that is, assuming all variables take on the best possible value? (A negative amount should be indicated by a minus sign. Enter your answers in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
B.) What is the NPV in the worst case senario? (A negative amount should be indicated by a minus sign. Enter your answers in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
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