Question

We are evaluating a project that costs $800,000, has a life of 8 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $800,000 per year. The tax rate is 21 percent and we require a return of 11 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. |

Answer #1

We are evaluating a project that costs $500,000, has a life of 8
years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 50,000 units per year. Price per unit is $40, variable
cost per unit is $25, and fixed costs are $600,000 per year. The
tax rate is 22 percent and we require a return of 12 percent on
this project. Suppose the projections given for...

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,...

We are evaluating a project that costs $735,200, has an
eight-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 80,000 units per year. Price per unit is $48, variable
cost per unit is $33, and fixed costs are $730,000 per year. The
tax rate is 22 percent, and we require a return of 12 percent on
this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $560,400, 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 80,000 units per year. Price per unit is $38, variable
cost per unit is $24, and fixed costs are $680,000 per year. The
tax rate is 22 percent, and we require a return of 10 percent on
this project. Suppose the projections given for price, quantity,...

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,...

We are evaluating a project that costs $1,080,000, 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 52,000 units per year. Price per unit is $50, variable
cost per unit is $30, and fixed costs are $730,000 per year. The
tax rate is 35 percent, and we require a return of 15 percent on
this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $571,800, 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 80,000 units per year. Price per unit is $40, variable
cost per unit is $25, and fixed costs are $685,000 per year. The
tax rate is 23 percent, and we require a return of 11 percent on
this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $786,000, has an
eight-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 65,000 units per year. Price per unit is $48, variable
cost per unit is $25, and fixed costs are $725,000 per year. The
tax rate is 22 percent, and we require a return of 10 percent on
this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $744,000, 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 45,000 units per year. Price per unit is $60, variable
cost per unit is $20, and fixed costs are $740,000 per year. The
tax rate is 35 percent, and we require a return of 18 percent on
this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $908,000, has a four-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 87,200 units per year. Price per unit is $34.35,
variable cost per unit is $20.60, and fixed costs are $752,000 per
year. The tax rate is 30 percent, and we require a return of 12
percent on this project.
Suppose the projections given for price, quantity,...

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