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

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 $\pm$ 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