We are evaluating a project that costs $1,675,000, 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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Required: 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. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV Best-case $ Worst-case $

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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We are evaluating a project that costs $1,675,000, 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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Required: 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. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV Best-case $ Worst-case $
We are evaluating a project that costs $1,675,000,
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 91,000 units per
year. Price per unit is $35.95, variable cost per unit is
$21.40, and fixed costs are $775,000 per year. The
tax rate is 35 percent, and we require a return of 11
percent on this project.
Required:
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. (Do not round
intermediate calculations. Negative amounts
should be indicated by a minus sign. Round your
answers to 2 decimal places (e.g., 32.16).)
NPV
Best-case
Worst-case
%24
%24
Transcribed Image Text:We are evaluating a project that costs $1,675,000, 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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Required: 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. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV Best-case Worst-case %24 %24
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