Question

A)We are evaluating a project that costs $117027, has a seven-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 4144 units per year. Price per unit is $52, variable cost per unit is $28, and fixed costs are $82376 per year. The tax rate is 39 percent, and we require a 13 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-10 percent. What is the NPV of the project in worst-case scenario? (Negative amount should be indicated by a minus sign. Round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)

B)McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $104440 on research and development for the new clubs. The plant and equipment required will cost $2895663 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $130371 that will be returned at the end of the project. The OCF of the project will be $872587. The tax rate is 29 percent, and the cost of capital is 11 percent. What is the NPV for this project? (Negative amount should be indicated by a minus sign. Round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)

Answer 1