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We are evaluating a project that costs $103463, has a seven-year life, and has no salvage...

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Finance

We are evaluating a project that costs $103463, has a seven-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 4108 units per year. Price per unit is $52, variablecost per unit is $29, and fixed costs are $82337 per year. The taxrate is 36 percent, and we require a 9 percent return on thisproject. Suppose the projections given for price, quantity,variable costs, and fixed costs are all accurate to within +/-8percent. What is the NPV of the project in worst-case scenario?

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Transcribed Image Text

We are evaluating a project that costs $103463, has a seven-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 4108 units per year. Price per unit is $52, variablecost per unit is $29, and fixed costs are $82337 per year. The taxrate is 36 percent, and we require a 9 percent return on thisproject. Suppose the projections given for price, quantity,variable costs, and fixed costs are all accurate to within +/-8percent. What is the NPV of the project in worst-case scenario?

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