Problem
• We are evaluating a project that costs $845,000, has an eight-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 51,000 units per year. Price per unit is $53, variable cost per unit is $27, and fixed cost are $950,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project.
• In the previous problem, 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 figure.