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Unit price: $50 Variable cost: $30 Fixed Cost: $430,000 Expected Sales: 42,000 units per year However,...

Unit price: $50
Variable cost: $30
Fixed Cost: $430,000
Expected Sales: 42,000 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% high or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.9 million, which will be depreciate straight line over the project life to a final value of zero. The firm’s tax rate is 35% and the required rate of return is 10%.

  1. What is project NPV in the best case scenario, that is, assuming all variables take on the best possible value?
  2. What is project NPV in the worst case scenario?

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jeff jeffy answered 6 months ago
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