We Are Evaluating a Project That Costs $854,000,has a 15-Year

question 21

Multiple Choice

We are evaluating a project that costs $854,000,has a 15-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 154,000 units per year.Price per unit is $41,variable cost per unit is $20,and fixed costs are $865,102 per year.The tax rate is 33 percent,and we require a 14 percent return on this project.Suppose the projections given for price,quantity,variable costs,and fixed costs are all accurate to within ±14 percent.What is the worst-case NPV?

• A)$984,613
• B)$1,267,008
• C)$1,489,511
• D)$1,782,409
• E)$1,993,870

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Definitions:

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