Question
BREAK-EVEN & SENSITIVITY ANALYSIS: We are evaluating a project that costs $840000, has an eight-year life, and has no salvage value. Assume that depreciation is
BREAK-EVEN & SENSITIVITY ANALYSIS: We are evaluating a project that costs $840000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60000 units per year. Price per unit is $41, variable cost per unit is $18, and fixed costs are $420000 per year. The tax rate is 35%, and we require a return of 20% on this project.
In dollar terms, what is the sensitivity of NPV to changes in the units sold projection? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places)
In percentage terms, what is the sensitivity of NPV to changes in the units sold projection? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places)
In dollar terms, what is the sensitivity of OCF to changes in the variable cost per unit projection? (Round answer to 2 decimal places, round intermediate calculations to 5 decimal places)
In percentage terms, what is the sensitivity of OCF to changes in the variable cost per unit projection? (Round answer to 4 decimal places, round intermediate calculations to 5 decimal places)
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