Project analyzer team in Lippo Group is evaluating a project that costs $525,000, hasa four-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 240,000 units per year. Price per unit is $30.00, variable cost per unit is $15, and fixed costs are $1,050,000 per year. The tax rate is 35 percent, and we require a 12 percent return on this project.

a. Calculate the Accounting break-even point and NPV. What is the degreeof operating leverage at the accounting break-even point? (ignoring Tax)

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 300 unit decrease in projected sales.