We are evaluating a project that costs $744,000, has a six-year life, and has no salvage...

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We are evaluating a project that costs $744,000, 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 45,000 units per year. Price per unit is $60, variablecost per unit is $20, and fixed costs are $740,000 per year. Thetax rate is 35 percent, and we require a return of 18 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.

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3.9 Ratings (692 Votes)

Please see the table below Please be guided by the second column titled Linkage to understand the mathematics The last row highlighted in yellow is your answer Figures if any in See Answer

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Transcribed Image Text

We are evaluating a project that costs $744,000, 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 45,000 units per year. Price per unit is $60, variablecost per unit is $20, and fixed costs are $740,000 per year. Thetax rate is 35 percent, and we require a return of 18 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.