ANswers.docx - Corporate Finance Chapter 11 Test 1 Consider the following project Initial Investment Quantity(units Selling Price Variable Cost Fixed

ANswers.docx - Corporate Finance Chapter 11 Test 1 Consider...

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Corporate Finance Chapter 11 Test 1. Consider the following project: Initial Investment $5,200,000 Quantity (units) 35,000 Selling Price $280 Variable Cost $185 Fixed Cost $985,000 Useful Life (Straight Line to zero) 5 Tax Rate 38% Required Return 13% The company has estimated an initial NWC investment of $410,000 which will be returned at the end of the project. The equipment is estimated to have a $500,000 salvage value at the end of the project. a. Calculate OCF for this project. What is the NPV? What if management believes that the initial cost and salvage value are accurate within 15%; selling price is accurate within 10%; and NWC is accurate within 5%.
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