The most likely outcomes for a particular project are estimated as follows: Unit price: $ 80 Variable cost: $ 60 Fixed cost: $ 440,000 Expected sales: 40,000 units...

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Finance

The most likely outcomes for a particular project are estimatedas follows:
Unit price: $ 80
Variable cost: $ 60
Fixed cost: $ 440,000
Expected sales: 40,000 units per year
However, you recognize that some of these estimates are subjectto error. Suppose that each variable may turn out to be either 5%higher or 5% lower than the initial estimate. The project will lastfor 10 years and requires an initial investment of $1.1 million,which will be depreciated straight-line over the project life to afinal value of zero. The firm’s tax rate is 40% and the requiredrate of return is 14%.
b. What is project NPV in the worst-casescenario? (A negative amount should be indicated by a minussign. Enter your answer in dollars not in millions. Do not roundintermediate calculations. Round your answer to the nearest dollaramount.)

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The most likely outcomes for a particular project are estimatedas follows:Unit price:$80Variable cost:$60Fixed cost:$440,000Expected sales:40,000units per yearHowever, you recognize that some of these estimates are subjectto error. Suppose that each variable may turn out to be either 5%higher or 5% lower than the initial estimate. The project will lastfor 10 years and requires an initial investment of $1.1 million,which will be depreciated straight-line over the project life to afinal value of zero. The firm’s tax rate is 40% and the requiredrate of return is 14%.b. What is project NPV in the worst-casescenario? (A negative amount should be indicated by a minussign. Enter your answer in dollars not in millions. Do not roundintermediate calculations. Round your answer to the nearest dollaramount.)


Unit price:	$	80
Variable cost:	$	60
Fixed cost:	$	440,000
Expected sales:		40,000	units per year