Question: A firm is considering a project producing sweaters that requires the up-front purchase of machinery for $4.2 million. The machinery will be depreciated straightline over

A firm is considering a project producing sweaters that requires the up-front purchase of machinery for $4.2 million. The machinery will be depreciated straightline over 6 years. The project has no other up-front costs. The firm expects that, for each of the next 6 years, it will be able to sell 100,000 sweaters each year for $80 per sweater. The cost of producing each sweater is expected to be $35. The fixed costs associated with this project are expected to be $3.2 million per year. After 6 years, this project will generate no additional cash flows. The estimates of the number of units sold, the price at which each unit is sold, the cost of producing each unit, and the fixed costs associated with the project, are all subject to an error of plus or minus 8%. The firm's tax rate is 22%. The discount rate associated wtih the sweater project is 17% per year compounded annually. What is the net present value of this project under the worst case scenario? Round all intermediate calculations to 6 decimal points. Your final answer should be within $100 of the correct answer choice. -$7,832 $1,818,257 $3,941,931 -$4,101,915
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