We are evaluating a project that costs $2,190,000, has a 8-year life, and has no salvagevalue. Assume that depreciation is straight-line to zero over the life of the project. Salesare projected at 91,200 units per year. Price per unit is $38.97, variable cost per unit is$24.05, and fixed costs are $866,000 per year. The tax rate is 22 percent and werequire a return of 11 percent on this project.Suppose the projections given for price, quantity, variable costs, and fixed costs are allaccurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. (Anegative answer should be indicated by a minus sign. Do not round intermediatecalculations and round your answers to 2 decimal places, e.g., 32.16.)Best-case NPVWorst-case NPV

Solution:- Given, Project cost = $2,190,000 years of life = 8 No salvage value Sales units = 91,200…

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. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case NPV Worst-case NPV

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. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case NPV Worst-case NPV

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...

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