Question: Tom is evaluating a project that costs $ 1 , 0 8 0 , 0 0 0 , has a ten - year life, and

Tom is evaluating a project that costs $1,080,000, has a ten-year life, and has no salvage
value. Assume that depreciation is straight-line to zero over the life of the project. Sales
are projected at 52,000 units per year. Price per unit is $50, variable cost per unit is $29
and fixed costs are $730,000 per year. The tax rate is 34 percent, and we require a return
of 15 percent on this project. Suppose the projections given for price, quantity, variable
costs, and fixed costs are all accurate to within \pm 10 percent. Help Tom calculate the best-
case and worst-case NPV figures.

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