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BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct

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BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year.

In addition to the BASIC INFORMATION, you expect the number of units sold to be 7,000 with an upper bound of 8,000 and a lower bound of 6,000, and you expect the variable cost per unit to be $10 per unit with an upper bound of $12.50 and a lower bound of $7.50. Assuming a tax rate of 30%, compute the IRR for the BEST case. Note that salvage is $0, and NWC is $0.

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Definitions:

Importance

The quality or state of being of great significance or value; often determined by its impact or influence on events or decisions.

Altruism

The selfless concern for the well-being of others without expectation of reward or recognition.

Helping Others

The act of providing assistance, support, or kindness to other individuals without expecting anything in return.

Cost

An amount that must be paid or spent to buy or obtain something, covering a wide range of economic activities from personal finance to business operations.

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