We are evaluating a project that costs $966,000, 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 131,000 units per year. Price per unit is $35, variable cost per unit is $26, and fixed costs are $979,524 per year. The tax rate is 25 percent, and we require a return of 14 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 b. Calculate the worst-case NPV. Worst case

We are evaluating a project that costs $966,000, 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 131,000 units per year. Price per unit is $35, variable cost per unit is $26, and fixed costs are $979,524 per year. The tax rate is 25 percent, and we require a return of 14 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 b. Calculate the worst-case NPV. Worst case

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Description: We are evaluating a project that costs $966,000, has a life of twelve years, and has nosalvage value. Assume that depreciation is straight-line to zero over the life of theproject. Sales are projected at 131,000 units per year. Price per unit is $35

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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