We are evaluating a project that costs $940,000, has a four-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 88,000 units per year. Price per unit is $34.75, variable cost per unit is $21.00, and fixed costs are $760,000 per year. The tax rate is 30 percent, and we require a return of 13 percent on this project.
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.
Best-case NPV:
Worst-case NPV: