In: Finance
We are evaluating a project that costs $1,980,000, has a 7-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 89,100 units per year. Price per unit is $38.55, variable cost per unit is $23.70, and fixed costs are $845,000 per year. The tax rate is 25 percent and we require a return of 12 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
Calculate the best-case and worst-case NPV figures.