Question

the mostly outcomes for a particular project are estimated as follows:

Unit Price: $50

Variable Cost: $30

Fixed Cost: $490000

Expected sales: 48000 units per year

however, you recognize that some of the estimates are subject to error. Suppose that each variable may turn out to be either 10% higher or 10% lower than the initial estimate. the project will last for 10 years and require an initial investment of $2.3 million, which will be depreciated straight line over the project life to a final value of zero. The firm's tax rate is 30% and the required rate of return is 10%

What is the best case scenario NPV

What is the worst case scenario NPV

preferably in excel with formulas please

Answer #1

The most likely outcomes for a particular project are
estimated as follows:
Unit price:
$
50
Variable cost:
$
30
Fixed cost:
$
410,000
Expected sales:
40,000
units per year
However, you recognize that some of these estimates are
subject to error. Suppose that each variable may turn out to be
either 10% higher or 10% lower than the initial estimate. The
project will last for 10 years and requires an initial investment
of $1.4 million, which will be depreciated...

The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
70
Variable cost:
$
50
Fixed cost:
$
200,000
Expected sales:
35,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 10%
higher or 10% lower than the initial estimate. The project will
last for 10 years and requires an initial investment of $1.2
million, which will be depreciated...

The most likely outcomes for a particular project are estimated
as follows:
Unit price: $ 60 Variable cost: $ 40 Fixed cost: $ 420,000
Expected sales: 47,000 units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 10%
higher or 10% lower than the initial estimate. The project will
last for 10 years and requires an initial investment of $2.1
million, which will be depreciated...

The most likely outcomes for a particular project are estimated
as follows: Unit price: $ 80 Variable cost: $ 60 Fixed cost: $
280,000 Expected sales: 30,000 units per year However, you
recognize that some of these estimates are subject to error.
Suppose that each variable may turn out to be either 5% higher or
5% lower than the initial estimate. The project will last for 10
years and requires an initial investment of $1.0 million, which
will be depreciated...

Unit Price: $60, Variable Cost: $40, Fixed-Cost $420,000,
Expected Sales: 47,000 Units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 10%
higher or 10% lower than the initial estimate. The project will
last for 10 years and requires an initial investment of $2.1
million, which will be depreciated straight-line over the project
life to a final value of zero. The firm’s tax rate is...

Base
Lower
Upper
Unit Sales
6,000
5,500
6,500
Price per unit
160
150
170
VC per unit
120
116
124
FC
100,000
90,000
110,000
The Can-Do Co. is analyzing a proposed project. The company
needs to purchase equipment with the initial cost of $400,000. The
project has a 5-year life and equipment is straight-line
depreciated to zero. At the end of the project, equipment is worth
nothing. The required return is 12%, and the tax rate is 34%. Below
are...

Sloan Transmissions, Inc., has the following estimates for its
new gear assembly project: price = $1,200 per unit; variable costs
= $240 per unit; fixed costs = $2.6 million; quantity = 70,000
units. Suppose the company believes all of its estimates are
accurate only to within ±10 percent. What values should the company
use for the four variables given here when it performs its
best-case scenario analysis? What about the worst-case scenario?
Scenario Units Sales Unit Price Unit Variable cost...

Consider a project to supply Detroit with 30,000 tons of machine
screws annually for automobile production. You will need an initial
$4,000,000 investment in threading equipment to get the project
started; the project will last for 3 years. The accounting
department estimates that annual fixed costs will be $700,000 and
that variable costs should be $200 per ton; accounting will
depreciate the initial fixed asset investment straight-line to zero
over the 3-year project life. It also estimates a salvage value...

Consider a project to supply Detroit with 20,000 tons of machine
screws annually for automobile production. You will need an initial
$2,800,000 investment in threading equipment to get the project
started; the project will last for 5 years. The accounting
department estimates that annual fixed costs will be $750,000 and
that variable costs should be $260 per ton; accounting will
depreciate the initial fixed asset investment straight-line to zero
over the 5-year project life. It also estimates a salvage value...

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 $30, and fixed costs are $640,000 per year. The
tax rate is 35 percent, and we require a return of 12 percent on
this project. Suppose the projections given for price, quantity,...

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