A 6-Year Project Has Expected Sales of 2,000 Units,±4 Percent

question 31

Multiple Choice

A 6-year project has expected sales of 2,000 units,±4 percent.The expected variable cost per unit is $8,and the expected fixed costs are $9,800.The fixed and variable cost estimates are considered accurate within a range of ±2 percent.The sales price is estimated at $22 a unit,±3 percent.The project requires an initial investment of $42,000 for equipment that will be depreciated straight-line to zero over the project's life.The equipment has a pretax salvage value of $5,000 at the end of the project.The project requires $2,600 in net working capital during its life.The discount rate is 9 percent,and tax rate is 30 percent.What is the net present value for the optimistic scenario?

• A)$35,096.52
• B)$34,008.12
• C)$28,008.46
• D)$31,490.07
• E)$22,295.33

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Definitions:

Purchasing Power

The ability of an individual or group to buy goods and services with their income.

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A physical quantity expressing hot and cold, measured with a thermometer and quantitatively determined by the average kinetic energy of the molecules.