Question: When evaluating a project that cost $732,000, has a six year life, and has no salvage value. Assume that depreciation is straight-line to zero over
When evaluating a project that cost $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 $30, and fixed cost are $640,000 per year. The tax rate is 35 percent, and the required return is 12 percent for the project. Suppose the projections given for price, quantity, variable cost, and fixed cost are all accurate to within +/-10 percent.
Calculate the best-case and worst-case NPV figures.
NPV
Best-case $
Worst-case $
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