We are evaluating a project that costs $691,200; 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 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±15 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case Worst-case _

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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We are evaluating a project that costs $691,200; 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 85,000 units per year. Price per unit is $50, variable cost
per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we
require a return of 10 percent on this project. Suppose the projections given for price,
quantity, variable costs, and fixed costs are all accurate to within ±15 percent.
Calculate the best-case and worst-case NPV figures. (A negative answer should be
indicated by a minus sign. Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)
Best-case
Worst-case
Transcribed Image Text:We are evaluating a project that costs $691,200; 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 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±15 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case Worst-case
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