Depreciation is straight-line to zero over life of project

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Reference no: EM13917361

We are evaluating a project that costs $1,180,000, has a five-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 88,100 units per year. Price per unit is $34.80, variable cost per unit is $21.05, and fixed costs are $761,000 per year. The tax rate is 40 percent, and we require a return of 10 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.

Reference no: EM13917361

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