Natural corp is evaluating to upgrade its facilities to increase its production efficiency. The

project requires an initial investment of RM3 million. The projects useful life is 6 years which

depreciates using straight-line method to zero book value. In the event of normal business

condition, the expected financial estimations are as follows:

Annual sales (Units) 40,000

Selling price per unit (RM) 80.00

Variable cost per unit (RM) 40.00

Fixed cost (RM) 375,000.00 semi-annually

The corporate tax rate is 30 percent and the required rate of return is 12 percent

a. Calculate the projects accounting and cash break-even points

b. Calculate the projects upper bound and lower bound if the accuracy of the estimations is

within the rage of +/- 15 percent.

c. Calculate the projects net present value (NPV) for the best- and worst-case scenarios.

d. Evaluate the sensitivity of the NPV for the best case to changes in variable cost.

e. Determine the degree of operating leverage (DOL) at accounting break-even and identify

the new OCF if unit sales increase by 15 percent.