A project has an initial cost of $94,000 for equipment, which will be depreciated straight-line to zero over the five-year life of the project. There is no salvage value on the equipment. No working capital is required. Sales are estimated at 6,000 units at a selling price of $31.40 per unit. Variable costs are $22.80 and fixed costs are $41,600. The required rate of return is 14% and the marginal tax rate is 35%. If the sales quantity increases by 100 units, the net present value will increase by:
A) $667
B) $897
C) $1,364.
D) $1,919.
E) $2,952

Question

Quizplus · Accepted Answer

The Answer of A project has an initial cost of $94,000 for equipment, which will be depreciated straight-line to zero over the five-year life of the project. There is no salvage value on the equipment. No working capital is required. Sales are estimated at 6,000 units at a selling price of $31.40 per unit. Variable costs are $22.80 and fixed costs are $41,600. The required rate of return is 14% and the marginal tax rate is 35%. If the sales quantity increases by 100 units, the net present value will increase by:
A) $667
B) $897
C) $1,364.
D) $1,919.
E) $2,952

A Project Has an Initial Cost of $94,000 for Equipment