Calculate the npv of project

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You, as the CFO of Windsor Co., are considering an investment of $420,000 in a machine with a CCA rate of 20% and a seven-year economic life. The appropriate discount rate is 13%, and the corporate tax rate for the company is 35%. Assume all revenues and expenses, which are presented below, are received and paid in cash. Assets will remain in the CCA class after the project ends.

 

Pessimistic 

Expected

Optimistic

Unit sales

23,000

25,000

27,000

Price ($)

38

40

42

Variable costs per unit ($)

21

20

19

Fixed costs per year ($)

320,000

300,000

280,000

  1. Calculate the NPV of project in each of the above scenarios
  2. If each scenario is equally likely, is the machine a worthwhile investment?

Reference no: EM133120186

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