Adequate information: Initial investment = $604,000 Life of the project = 8 years Price per unit = $36 Variable cost per unit = $17 Fixed costs = $685,000 Quantity = 55,000 Tax rate = 21% Required rate of return = 15% To compute: Best-case NPV and Worst-case NPV Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow .

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Chapter 7, Problem 2QAP

Summary Introduction

Adequate information:

Initial investment = $604,000

Life of the project = 8 years

Price per unit = $36

Variable cost per unit = $17

Fixed costs = $685,000

Quantity = 55,000

Tax rate = 21%

Required rate of return = 15%

To compute: Best-case NPV and Worst-case NPV

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

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