The most likely outcomes for a particular project are estimated as follows: Unit price: $...
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Accounting
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 60 Variable cost: $ 40 Fixed cost: $ 390,000 Expected sales: 38,000 units per year However, you recognize that some of these estimates are subject to error. Suppose each variable turns out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.8 million, which will be depreciated straight-line over the project life to a final value of zero. The firms tax rate is 21%, and the required rate of return is 10%. What is project's NPV in the best-case scenario, that is, assuming all variables take on the best possible value? What is project's NPV in the worst-case scenario?
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