A project requires an initial investment of $10,000

A project requires an initial investment of $10,000, straight-line depreciable to zero over four years. The discount rate is 10%. The firm’s tax bracket is 34%, and they receive a tax credit for negative earnings in the year in which the loss occurs. Additional information for variables with forecast error is shown below: (10 marks)ItemBase CaseLower BoundUpper BoundUnit Sales3,0002,7503,250Price/Unit$14$13$16Sales$42000$35750$52000Variable cost/unit$9$10$8Total variable costs$27,000$27,500$26,000Fixed costs$9,000$10,000$8,500Annual Depreciation$2,500$2,500$2,500EBIT$3,500-4,250$15,000Taxes pay/cred1190(1445)5100OCF$4,810(305)$12,400NPV Base CaseInvestment-10,000OCF4,810CCATS2,318Net Present Value-2,872NPV Worst CaseInvestment-10,000OCF-305CCATS2,318Net Present Value-7,987NPV Best CaseInvestment-10,000OCF5100CCATS2,318Net Present Value-2,582