Explaining and analysing the project in detail

Reference no: EM1312730

Explaining and Analysing the project in detail and finding NPV

You are considering a new product launch. The project will cost $870,000, have a 4-year life, and have no salvage value; depreciation is straight -line to zero. Sales and projected at 210 units per year; price per unit will be $20,000. Variable cost per unit will be $16,000, and fixed costs will be $348,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 36 percent.

Required:

Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within ± 11 percent. Determine the upper and lower bounds for these projections. The base-case NPV is $___________. The best-case NPV is $_________ and the worst-case NPV is $_________. (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places, e.g. 32.16)

	Upper Bound	Lower Bound
Unit sales	------	------
Variable cost per unit	$-----	$-----
Fixed costs	$-----	$-----

Reference no: EM1312730

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