We are evaluating a project that costs $1,675,000, has a six-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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Required: 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. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV Best-case $ Worst-case $ We are evaluating a project that costs $1,675,000,has a six-year life, and has no salvage value. Assumethat depreciation is straight-line to zero over the lifeof the project. Sales are projected at 91,000 units peryear. Price per unit is $35.95, variable cost per unit is$21.40, and fixed costs are $775,000 per year. Thetax rate is 35 percent, and we require a return of 11percent on this project.Required:Suppose the projections given for price, quantity,variable costs, and fixed costs are all accurate towithin ±10 percent. Calculate the best-case andworst-case NPV figures. (Do not roundintermediate calculations. Negative amountsshould be indicated by a minus sign. Round youranswers to 2 decimal places (e.g., 32.16).)NPVBest-caseWorst-case%24%24

NPV stands for Net Present Value which is defined as the difference among the cash inflows present…

Answered: We are evaluating a project that costs…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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We are evaluating a project that costs $1,675,000, has a six-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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Required: 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. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places (e.g., 32.16).) NPV Best-case $ Worst-case $

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