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BE CLEAR PLEASE.THANK YOU! We are evaluating a project that costs $787,000, has a life of 7 years, and has no salvage value. Assume that
BE CLEAR PLEASE.THANK YOU!
We are evaluating a project that costs $787,000, has a life of 7 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 136,000 units per year. Price per unit is $36, variable cost per unit is $24, and fixed costs are $803,527 per year. The tax rate is 21 percent, and we require a return of 18 percent on this project. 1a. Calculate the accounting break-even point. Break-even point 1b. What is the degree of operating leverage at the accounting break-even point? DOL 2a. Calculate the base-case cash flow. Cash flow 2b. Calculate the NPV. NPV 2c. What is the sensitivity of NPV to changes in the quantity sold? ANPVIAQ 2d. What your answer tells you about a 500-unit decrease in the quantity sold? NPV drop 3a. What is the sensitivity of OCF to changes in the variable cost figure? AOCFIAVC 3b. How much will OCF change if variable costs decrease by $1? OCFStep by Step Solution
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