Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can someone help out with these? We are evaluating a project that costs $868,000, has a fifteen-year life, and has no salvage value. Assume that

image text in transcribed

image text in transcribed

Can someone help out with these?

We are evaluating a project that costs $868,000, has a fifteen-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 140,000 units per year. Price per unit is $39, variable cost per unit is $25, and fixed costs are $871,472 per year. The tax rate is 37 percent, and we require a 14 percent return on this project. Requirement 1: Calculate the accounting break-even point. (Round your answer to the nearest whole number. (e.g., 32)) Break-even point 66381 units Requirement 2: (a)Calculate the base-case cash flow and NPV.(Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16)) es Base-case cash flow NPV $ $ (b)What is the sensitivity of NPV to changes in the sales figure? (Do not include the dollar sign ($). Round your answer to 3 decimal places. (e.g., 32.161)) Sensitivity of NPV $ (c) Calculate the change in NPV If there is a 500-unit decrease in projected sales. (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16)) $ Change in NPV Requirement 3: (a)What is the sensitivity of OCF to changes in the variable cost figure? (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to the nearest whole number. (e.g., 32)) Sensitivity of OCF $ (b)Calculate the change in OCF if there is a $1 decrease in estimated variable costs. (Do not include the dollar sign ($). Round your answer to the nearest whole number. (e.g., 32)) Change in OCF $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Amazon Goldmine How Amazon Can Make You A Millionaire

Authors: Mrs Esther B. Odejimi

1st Edition

1533513406, 978-1533513403

More Books

Students also viewed these Finance questions