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What is the net income under the worst-case scenario

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KLD Co. is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 4 percent. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6 percent range. The depreciation expense is $30,000 per year, over the 5-year life of the project, using the straight line. The tax rate is 35 percent. The sale price is estimated at $14 a unit, plus or minus 5 percent.

Question (i) What are the earnings before interest and taxes under the base case (i.e. expected) scenario?

Question (ii) What are the earnings before interest and taxes under a best-case scenario?

Question (iii) What is the net income under the worst-case scenario?

Question (iv) What is the NPV under the base case scenario if the required rate of return is 12%?

Reference no: EM132613620

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