The Meldrum Co. is analyzing a proposed project. The company expects to sell 3,000 units, give or take 15%. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense is $4,000. The sale price is estimated at $18/unit, give or take 2%. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 34% and the required rate of return is 12%. What is the net present value of the worst-case scenario?

The Meldrum Co. is analyzing a proposed project. The company expects to sell 3,000 units, give or take 15%. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense is $4,000. The sale price is estimated at $18/unit, give or take 2%. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 34% and the required rate of return is 12%. What is the net present value of the worst-case scenario?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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