Question
A project requires an initial investment of $10,000, straight-line depreciable to zero over four years. The...
A project requires an initial investment of $10,000, straight-line depreciable to zero over four years. The discount rate is 10%. Your tax bracket is 34% and you receive a tax credit for negative earnings in the year in which the loss occurs. Additional information for variables with forecast error are shown below.
Base Case | Lower Bound | Upper Bound | |
Unit Sales | 3,000 | 2,750 | 3,250 |
Price/unit | $14 | $13 | $16 |
Variable cost/unit | $9 | $8 | $10 |
Fixed costs | $9,000 | $8,500 | $10,000 |
Suppose you are interested in the project's sensitivity to unit price. What is the NPV at a price of $13 per unit?
A. -$10,967
B. -$1,029
C. $105
D. $1,868
E. $2,056
The answer is B, please show all the steps, thanks
Answers
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