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1 . A 1 0 - year steel pipe - producing project requires $ 9 6 million in upfront investment ( all in depreciable assets
A year steel pipeproducing project requires $ million in upfront investment all in depreciable assets $ million of which is borrowed capital at an interest rate of per year. The expected pipe sales are pipes per year. The expected price per pipe is $ and the variable cost is $ per unit. The fixed costs excluding depreciation are expected to be $ million per year for ten years. The upfront investment will be depreciated on a straightline basis for the year life of the project to $ million book value. The expected salvage value of the assets is $ million. The tax rate is and the RRR applicable to the project is
a Calculate the accounting and cash breakeven points.
b Calculate the DOL, DFL and DCL Do not use the equations and do your own change in sales
c Calculate the NPV breakeven annual free cash flow for the project.
d Calculate the NPV breakeven point Qb
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