Question: Tom is evaluating a project that costs $3,500,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
Tom is evaluating a project that costs $3,500,000, has a four-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 100,000 units per year, price per unit is $55, variable cost per unit is $18, and fixed costs are $2 million per year. The tax rate is 21%, and the required rate of return on the project is 10%.
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8. Calculate the NPV for the project. (Round to 2 decimals)
9. Calculate the accounting break-even number of units for the project. (Round to 2 decimals)
10. Calculate the equivalent annual cost of the machine. (Round to 2 decimals)
11. Calculate the financial breakeven number of units for the project. (Round to 2 decimals)
12. Suppose the price, units, VC per unit, and FC projections are accurate within +/- 10%. Calculate the best case NPV. (Round 2 decimals)
13. Suppose the price, units, VC per unit, and FC projections are accurate within +/- 10%. Calculate the worst-case NPV. (Round 2 decimals)
Use excel while answering, thank you!
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