Question
In: Finance
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 80...
The most likely outcomes for a particular project are estimated as follows:
| Unit price: | $ | 80 | |
| Variable cost: | $ | 60 | |
| Fixed cost: | $ | 440,000 | |
| Expected sales: | 40,000 | units per year | |
However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 5% higher or 5% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.1 million, which will be depreciated straight-line over the project life to a final value of zero. The firm’s tax rate is 40% and the required rate of return is 14%.
b. What is project NPV in the worst-case scenario? (A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
Solutions
jeff jeffy answered 8 months agoRelated Solutions
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 80...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
80
Variable cost:
$
60
Fixed cost:
$
380,000
Expected sales:
37,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 5%
higher or 5% lower than the initial estimate. The project will last
for 10 years and requires an initial investment of $1.7 million,
which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 80...
The most likely outcomes for a particular project are estimated
as follows:
Unit price: $ 80
Variable cost: $ 60
Fixed cost: $ 440,000
Expected sales: 40,000 units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 5%
higher or 5% lower than the initial estimate. The project will last
for 10 years and requires an initial investment of $1.1 million,
which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 80...
The most likely outcomes for a particular project are estimated
as follows:
Unit price: $ 80
Variable cost: $ 60
Fixed cost: $ 440,000
Expected sales: 40,000 units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn out to be either 5%
higher or 5% lower than the initial estimate. The project will last
for 10 years and requires an initial investment of $1.1 million,
which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 60...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
60
Variable
cost:
$
40
Fixed cost:
$
420,000
Expected
sales:
47,000
units per
year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn 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 $2.1
million, which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 50...
The most likely outcomes for a particular project are
estimated as follows:
Unit price: $ 50
Variable cost: $ 30
Fixed cost: $ 340,000
Expected sales: 35,000 units per year
However, you recognize that some of these estimates are
subject to error. Suppose that each variable may turn 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 $1.4 million, which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 50...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
50
Variable
cost:
$
30
Fixed cost:
$
410,000
Expected
sales:
40,000
units per
year
Modern Artifacts can produce keepsakes that will be sold for $60
each. Nondepreciation fixed costs are $1,400 per year, and variable
costs are $30 per unit. The initial investment of $5,000 will be
depreciated straight-line over its useful life of 5 years to a
final value of zero, and the...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 50...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
50
Variable cost:
$
30
Fixed cost:
$
490,000
Expected sales:
48,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn 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 $2.3
million, which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 60...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
60
Variable cost:
$
40
Fixed cost:
$
420,000
Expected sales:
47,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn 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 $2.1
million, which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 60...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
60
Variable cost:
$
40
Fixed cost:
$
250,000
Expected sales:
30,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn 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 $1.2
million, which will be depreciated...
The most likely outcomes for a particular project are estimated as follows: Unit price: $ 50...
The most likely outcomes for a particular project are estimated
as follows:
Unit price:
$
50
Variable cost:
$
30
Fixed cost:
$
360,000
Expected sales:
35,000
units per year
However, you recognize that some of these estimates are subject
to error. Suppose that each variable may turn 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 $1.6
million, which will be depreciated...
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