Use the following base case information to evaluate the project: PT Kolam Makara has a project costs $900,000, has a five-year life, and has a salvage value of $130,000. Depreciation is straight-line to zero. The required return is 14% and tax rate is 34%. Sales are projected at 2350 units per year. Price per unit is $400. Variable cost per unit is $200 and fixed costs are $150,000 per year. It is known that the depreciation expense is $180,000 per year. The engineering department estimates you will need an initial net working capital investment of $50,000. Suppose you think that the unit sales, price, variable cost, and fixed cost projections given are accurate to within 7%. 1. What are the upper and lower bounds for these projections? 2. What is the base-case NPV? 3. What are the best- and worst- case scenario NPVs?
Use the following base case information to evaluate the project:
PT Kolam Makara has a project costs $900,000, has a five-year life, and has a salvage value of $130,000.
Suppose you think that the unit sales, price, variable cost, and fixed cost projections given are accurate to within 7%.
1. What are the upper and lower bounds for these projections?
2. What is the base-case NPV?
3. What are the best- and worst- case scenario NPVs?
Step by step
Solved in 8 steps with 6 images
