Question: A fixed asset for a project costs $820 and will have no salvage value; depreciation is straight-line to zero over the 4-year life of the project. The firm made the following estimates for each year;
Price per unit ($) 18
Units sold 150
Variable cost per unit ($) 13
Fixed costs ($) 160
The firm has other profitable opportunities sufficient to cover any losses. The tax rate is 30% and the cost of capital is 15%. The estimates for price per unit, units sold, variable cost per unit, and fixed costs are believed to be accurate to within plusminus 10%. Find the net present value of the project in the worst-case scenario.