In the previous problem, suppose the projects given for price, quantity, variable costs, and fixed costs are all accurate to within +/- 10 percent. Calculate the best-case and worst case NPV figures. (previous problem as in the one below)

We are evaluating a project that costs $588,000; 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 70,000 units per year. Price per unit is $36, variable cost per unit is $20, and fixed costs are $695,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. Part a: Calculate the accounting break even. Part 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? (Professor Cursio comments: some textbooks use the term sensitivity to literally mean add one and/or subtract one unit of something in this case sales to see what the changes are. But for our purposes, the only sensitivity we care about is what the effect would be if sales are 500 units less than the base-case projection.) Part c: What is the sensitivity of OFC to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in variables costs. (Professor Cursio comments: similar to part b, all we care about is the effect of variable costs being one dollar less than the base-case projection.)