Question: We are evaluating a project that costs $854,000, has a 15-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life
We are evaluating a project that costs $854,000, has a 15-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales are projected at 154,000 units per year. Price per unit is $41,variable cost per unit is $20, and fixed costs are $865,102 per year. The tax rate is33 percent, and we require a 14 percent return on this project. Suppose theprojections given for price, quantity, variable costs, and fixed costs are allaccurate to within 14 percent. What is the worst-case NPV?
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