Estimated net cash flow and npv of project

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You are evaluating a project to supply the auto industry with 40,000 tons of machines screws annually for 5 years. The sales price is $280 per ton. You will need $1,750,000 investment to get the project started; the project will last for 5 years. The accountants estimate the annual fixed costs at $350,000 and variable costs at $250 per ton. They also estimate a before-tax salvage value of $550,000 at the end of 5 years. You face a WACC of 14% return and a tax rate of 40%.

(a.) What is the estimated Net Cash Flow and NPV of this project?

(b.) Suppose you believe that the accountant's initial investment and salvage value are accurate only to + or - 50%. What is the worst case scenario for Net Cash Flow and NPV of this project?

Reference no: EM131595182

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