AND

What is the degree of operating leverage at the accounting break-even point? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.)

Degree of operating leverage

You are considering a new product launch. The project will cost $2,050,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 170 units per year; price per unit will be $26,000, variable cost per unit will be $16,000, and fixed costs will be $560,000 per year. The required return on the project is 15 percent, and the relevant tax rate is 30 percent a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your NPV answers to 2 decimal places, e.g., 32.16. Round your other answers to the nearest whole number, e.g. 32.) Unit Sales Scenario Base Best Worst Variable Cost Fixed Costs NPV 170 187 153 $16000 14400 17600 $ 560000 504000 616000 $667246.2