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A project under consideration costs $500,000, has a five-year life and has no salvage value. Depreciation is straight-line to zero. The firm has made the

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A project under consideration costs $500,000, has a five-year life and has no salvage value. Depreciation is straight-line to zero. The firm has made the following projections related to this project: Unit Sales Price Per Unit Variable Cost Per Unit Fixed Costs Base Lower Case Bound 3,000 2,850 $400 $380 $250 $238 $250,000 $237,500 Upper Bound 3,150 $420 $263 $262,500 34 No additional The required return is 18 percent and the tax rate is 21 percent. investment in net working capital is required. Requirement 2: Your analysis of the project's NPV in the "base case" shows a NPV of $59,764. However, your boss has asked you to determine the sensitivity of the project's NPV to potential changes in fixed costs. Using the firm's estimate of the highest possible level of fixed costs, complete the table below and use your results to assess the sensitivity of the project's NPV to changes in fixed costs. (Round all answers except your sensitivity estimate to the nearest whole dollar (e.g., 32). Round the sensitivity estimate to 2 decimal places (e.g., 32.16). Negative amounts should be indicated by a minus sign.) $ Sales Variable Costs Fixed Costs Depreciation EBIT Taxes Net Income Operating Cash Flow Net Present Value (NPV) $ $ $ Sensitivity (ANPV/AFC) $

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