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1. A 10-year project that aims at manufacturing and selling metal alloy sheets requires $124.80 million in upfront investment (all in depreciable assets), $60
1. A 10-year project that aims at manufacturing and selling metal alloy sheets requires $124.80 million in upfront investment (all in depreciable assets), $60 million of which is borrowed capital at an interest rate of 5.60% per year. The expected sheet sales are 3,328,000 units per year. The expected price per sheet is $325 and the variable cost is $280 per unit. The fixed costs excluding depreciation are expected to be $46 million per year for ten years. The upfront investment will be depreciated on a straight-line basis for the 10-year life of the project to $15.60 million book value. The expected salvage value of the assets is $21 million. The tax rate is 28% and the RRR applicable to the project is 14%. a. Calculate the accounting and cash break- even points. b. Calculate the DOL, DFL, and DCL (c. Calculate the NPV breakeven annual free cash flow for the project. d.) Calculate the NPV break-even point (Qb).
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