Question
Could you please help to answer the below question and show how this could be determined in excel as well? Sensitivity Analysis and Break-Even Point.We
Could you please help to answer the below question and show how this could be determined in excel as well?
Sensitivity Analysis and Break-Even Point.We are evaluating a project that costs $604,000, has an 8 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 55,000 units per year.Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year.The tax rate is 21 percent and we require a return of 15 percent on this project.
a) Calculate the accounting break-even point.
b) Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure?Explain what your answer tells you about a 500-unit decrease in projected sales.
c) What is the sensitivity of OCF to changes in the variable cost figure?Explain what your answer tells you about a $1 decrease in estimated variable costs.
Thank you
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