Question
a project that costs $2,100,000, has a 7-year life, and has no salvaging value. Assuming that depreciation straight line to zero over the life of
a project that costs $2,100,000, has a 7-year life, and has no salvaging value. Assuming that depreciation straight line to zero over the life of this project. Sales are projected at 98,600 units per year. Price per unit is $37.79, variable cost per unit is $23.90, and fixed costs are $857,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on this project.
A. Calculate the base case operating cash flow and NPV
B. sensitivity of NPV to changes in the sales figure
C. if there is 500 unit decrease in sales how much would NPV change
D sensitivity of OCF to change in the variable cost figures
E. if there was a $1 decrease in esatimated variable costs how much would the OCF Change.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started