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We are evaluating a project that costs $787,000, has a life of twelve years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 159,000 units per year. Price per unit is $44, variable cost per unit is $28, and fixed costs are $789,361 per year. The tax rate is 22 percent, and we require a return of 18 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 17 percent. a. Calculate the best-case NPV. Best case $ 16,473,959 b. Calculate the worst-case NPV. Worst case 13

We are evaluating a project that costs $787,000, has a life of twelve years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 159,000 units per year. Price per unit is $44, variable cost per unit is $28, and fixed costs are $789,361 per year. The tax rate is 22 percent, and we require a return of 18 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 17 percent. a. Calculate the best-case NPV. Best case $ 16,473,959 b. Calculate the worst-case NPV. Worst case 13

Essentials Of Investments
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
Section: Chapter Questions
Problem 1PS
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We are evaluating a project that costs $787,000, has a life of twelve years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 159,000 units per year. Price per unit is $44, variable cost per unit is $28, and fixed costs are $789,361 per year. The tax rate is 22 percent, and we require a return of 18 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 17 percent. a. Calculate the best-case NPV. Best case $ 16,473,959 b. Calculate the worst-case NPV. Worst case 13
Transcribed Image Text:We are evaluating a project that costs $787,000, has a life of twelve years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 159,000 units per year. Price per unit is $44, variable cost per unit is $28, and fixed costs are $789,361 per year. The tax rate is 22 percent, and we require a return of 18 percent on this project. The projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 17 percent. a. Calculate the best-case NPV. Best case $ 16,473,959 b. Calculate the worst-case NPV. Worst case 13
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