Question

We are evaluating a project that costs $1,100,000, has a
ten-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 42,000 units per year. Price per unit is $50, variable
cost per unit is $25, and fixed costs are $820,000 per year. The
tax rate is 21 percent, and we require a return of 10 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.
**(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.)**

Answer #1

NPV (Normal Case) : 158407.34 |

NPV (Best-Case) :
830715.15 |

NPV (Worst-Case) :
-411962.10 |

Net Present Value (NPV): Present Value (inflows) - Investment (outflow) |

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