What about the worst case scenario

Assignment Help Financial Management

Reference no: EM131970378

The most likely outcomes for a particular project are estimated as follows:

Unit price: $50

Variable cost: $30

Fixed cost: $300,000

Expected sales: 30.000 units per year

However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10 percent higher or 10 percent lower than the initial estimate.

The project will last for 10 years and requires an initial investment of $1 million, which will be depreciated straight-line over the project life to a final value of zero.

The firm's tax rate is 35 percent and the required rate of return is 14 percent.

What is project NPV in the "best case" scenario, that is, assuming all variables take on the best possible value?

What about the "worst case" scenario?

Reference no: EM131970378

Questions Cloud

Kruskall-wallis test repeated measures anova : Is the Friedman test a one-way ANOVA? Also, is Kruskall-Wallis test Repeated measures ANOVA?

Determine the number of units of each asset in the portfolio : Write down equations that determine the number of units of each asset in the portfolio. Use notation N1 and N2 to represent the number of units of asset.

Compute the total fixed overhead of the company : Red, Inc. produces and sells a single product. Unit costs for direct materials and direct labor are S30. Compute the total fixed overhead of the company.

Confidence interval for the true population mean : Assuming a population standard deviation of $3000, show all the details in constructing a 90% confidence interval for the true population mean amount spent.

What about the worst case scenario : The project will last for 10 years and requires an initial investment of $1 million, which will be depreciated straight-line over the project life.

What are the key characteristics of the french new wave : What are the key characteristics of the French New Wave? What are the key characteristics of the Hollywood Renaissance?

Determine selling and administrative expenses : Determine selling and administrative expenses for each quarter. Complete the budgeted income statement for each quarter.

What will lincolns monthly payment be on a four-year loan : Lincoln wants to buy a new Mercedes-Benz Jeep. He will need to borrow $20,000 to go with his down payment in order to afford this car.

Explain what is the social science : SCC 200 What is social science? What does social science research involve, and why is social scientific research important?

User Account

All Pages