Final answer:
The base case operating cash flow for the project is $1,263,954.60 and the NPV is $198,372.03.
Step-by-step explanation:
The base case operating cash flow can be calculated by subtracting the variable cost per unit from the price per unit to get the contribution margin per unit, multiplying it by the projected sales units, and then subtracting the fixed costs. So, for this project, the base case operating cash flow would be:
(37.79 - 23.90) * 98,600 - 857,000 = $1,263,954.60
The Net Present Value (NPV) can be calculated by discounting the cash flows using the required return rate and summing them up. The NPV for this project can be calculated as follows:
NPV = Base Case Operating Cash Flow / (1 + Required Return Rate)^n - Initial Cost
Where n is the number of years. So, for this project, with a 10% required return rate and a 7-year life:
NPV = 1,263,954.60 / (1 + 0.10)^7 - 2,100,000 = $198,372.03