BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per
Unit sold is $10. Fixed costs are $30,000 per year.
In addition to the BASIC INFORMATION, you expect the number of units sold to be 7,000 with an
Upper bound of 8,000 and a lower bound of 6,000, and you expect the variable cost per unit to be
$10 per unit with an upper bound of $12.50 and a lower bound of $7.50. Assuming a tax rate of
30%, compute the IRR for the BEST case. Note that salvage is $0, and NWC is $0.
A) 5%
B) 12%
C) 17%
D) 34%
E) 74%

Question

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The Answer of BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per
Unit sold is $10. Fixed costs are $30,000 per year.
In addition to the BASIC INFORMATION, you expect the number of units sold to be 7,000 with an
Upper bound of 8,000 and a lower bound of 6,000, and you expect the variable cost per unit to be
$10 per unit with an upper bound of $12.50 and a lower bound of $7.50. Assuming a tax rate of
30%, compute the IRR for the BEST case. Note that salvage is $0, and NWC is $0.
A) 5%
B) 12%
C) 17%
D) 34%
E) 74%

BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct