Question: We are evaluating a project that costs $732,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
| We are evaluating a project that costs $732,000, has a six-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 55,000 units per year. Price per unit is $60, variable cost per unit is $39, and fixed costs are $640,000 per year. The tax rate is 22 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 10 percent. |
| Calculate the best-case and worst-case NPV figures. |
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