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Consider a project to supply Detroit with 35,000 tons of machine screws annually for automobile… 1 answer below » View complete question » Consider a project to supply Detroit with 35,000 tons of machine screws annually for automobile production. You will need an initial $2,900,000 investment in threading equipment to get the project started; the project will last for five years. The accounting department estimates that annual fixed costs will be $495,000 and that variable costs should be $285 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the five-year project life. It also estimates a salvage value of $300,000 after dismantling costs. The marketing department Consider a project to supply Detroit with 35,000 tons of machine screws annually for automobile production. You will need an initial $2,900,000 investment in threading equipment to get the project started; the project will last for five years. The accounting department estimates that annual fixed costs will be $495,000 and that variable costs should be $285 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the five-year project life. It also estimates a salvage value of $300,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $345 per ton. The engineering department estimates you will need an initial net working capital investment of $450,000. You require a 13 percent return and face a marginal tax rate of 38 percent on this project. (Do not round intermediate calculations.) a-1 What is the estimated OCF for this project? OCF $ a-2 What is the estimated NPV for this project? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ b. Suppose you believe that the accounting department’s initial cost and salvage value projections are accurate only to within ±15 percent; the marketing department’s price estimate is accurate only to within ±10 percent; and the engineering department’s net working capital estimate is accurate only to within ±5 percent. What is the worst-case NPV for this project? The best-case NPV? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) Worst-case $ Best-case $ View less » Aug 21 2015 09:46 PM
