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
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
Related questions
Question
Am. 111.
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education