Problem:

We are evaluating a project that costs $1,160,000, has a ten-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 44,000 units per year. Price per unit is $45, variable cost per unit is $20, and fixed costs are $645,000 per year. The tax rate is 35 percent, and we require a 20 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.

Required:

Calculate the best-case and worst-case NPV figures.

Note: Be sure to show how you arrived at your answer.