Question

Anna is reviewing a new 5-year project with expected sales of 3,400 units, give or take 8 percent. The expected variable cost per unit is $22 and the expected fixed costs are $47,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $33,000. The sale price is estimated at $45 a unit, give or take 3 percent. The project initially requires $165,000 of fixed assets and $42,000 of net working capital. At The end of the project, the networking capital will be recouped and the fixed assets will produce an aftertax cash inflow of $35,000. The tax rate is 14 percent and the discount rate is 14 percent. What is the net present value of the best-case scenario?

Answer 1