Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $585,000, has a six-year life and has no salvage value.

image text in transcribed

Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $585,000, has a six-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 85.000 units per year Price per unit is $37. variable cost per unit is $23 and fixed costs are $675,000 per year. The tax rate is 21 percent, and we require a return of 9 percent on this project -1.Calculate the accounting break-even point (Do not round intermediate calculations and round your answer to the nearest whole number, eg.. 32.) - What is the degree of operating leverage at the accounting break even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places e.g. 32.161.) b-1.Calculate the base-case cash flow and NPV. Do not round intermediate calculations. Round your cash flow answer to the nearest whole number, e.g. 32. Round your NPV answer to 2 decimal places, e.g. 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2 intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answer to the nearest whole number, e.g.. 32.) units -1. Break-even point a 2 DOLE 0-2 C NPV ANPNTAO DOCFAVC

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

Financial Accounting Principles And Issues

Authors: Michael H. Granof, Philip W. Bell

4th Edition

013321852X, 978-0133218527

More Books

Students also viewed these Accounting questions

Question

What types of questions would make up a behavioral interview?

Answered: 1 week ago