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Scenario Analysis [LO2] We are evaluating a project that costs $924,000, has an

ID: 2695184 • Letter: S

Question

Scenario Analysis [LO2] We are evaluating a project that costs $924,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, variable cost per unit is $31, and fixed costs are $825,000 per year. The tax rate is 35 percent, and we require a 15 percent return on this project Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within plusminus10 percent Calculate the best-case and worst-case NPV figures. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

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