The current available answer to this question is wrong. We are evaluating a project that costs...

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The current available answer to this question is wrong.
We are evaluating a project that costs $768,000, has a six-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 52,000 units per year. Price per unit is $60, variablecost per unit is $35, and fixed costs are $770,000 per year. Thetax rate is 35 percent, and we require a return of 15 percent onthis project. Suppose the projections given for price, quantity,variable costs, and fixed costs are all accurate to within ±10percent. Calculate the best-case and worst-case NPV figures. (Anegative answer should be indicated by a minus sign. Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.) NPV Best-case $ Worst-case $

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3.9 Ratings (499 Votes)

Best case Time line 0 1 2 3 4 5 6 Cost of new machine 768000 Initial Investment outlay 768000 Unit sales 57200 57200 57200 57200 57200 57200 Profits no of units sold sales price variable cost 1973400 1973400 1973400 1973400 1973400 1973400 Fixed cost 693000 693000 693000 693000 693000 693000 Depreciation Cost of equipmentno of years 128000 128000 128000 128000 128000 128000 Pretax cash flows 1152400 1152400 See Answer

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The current available answer to this question is wrong.We are evaluating a project that costs $768,000, has a six-yearlife, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 52,000 units per year. Price per unit is $60, variablecost per unit is $35, and fixed costs are $770,000 per year. Thetax rate is 35 percent, and we require a return of 15 percent onthis project. Suppose the projections given for price, quantity,variable costs, and fixed costs are all accurate to within ±10percent. Calculate the best-case and worst-case NPV figures. (Anegative answer should be indicated by a minus sign. Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.) NPV Best-case $ Worst-case $