You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows:Expected sales: 115,000 units per yearUnit price: $220Variable cost: $132Fixed cost: $4,890,000The project will last for 10 years and requires an initial investment of $16.70 million, which will be depreciated straight-line over theproject life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12%.However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause salesto fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $210. The goodnews is that fixed costs could be as low as $3,260,000, and variable costs would decline in proportion to sales.a. What is project NPV if all variables are as expected?Note: Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to thenearest whole dollar amount.b. What is NPV in the bad-case scenario?Note: Do not round intermediate calculations. Enter your answer in thousands not in millions and round your answer to thenearest whole dollar amount. Negative amount should be indicated with a minus sign.a. NPVb. NPV$6,816

Name: You are considering a proposal to produce and market a new sluffing m
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Description: You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows:Expected sales: 115,000 units per yearUnit price: $220Variable cost: $132Fixed cost: $4,890,000The project will last

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Business

Finance

Finance Question

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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