Question: We are evaluating a project that costs $1,000,000, has an seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $1,000,000, has an seven-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 80,000 units per year. Price per unit is $39, variable cost per unit is $23, and fixed costs are $650,000 per year. The tax rate is 20 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within 115 percent. Calculate the base-case, best-case and worst-case NPV figures (must use tax shield approach in forecasting cashflows). (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) SHOW YOUR WORK
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