Sensitivity Analysis and Break$-$Even $($LO$1,3)$ We are evaluating a project

that costs $$864,000,$ 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 $71,000$ units per year. Price per unit is $$49,$ variable cost per unit is $$33,$ and

fixed costs are $$765,000$ per year. The tax rate is $35\%,$ and we require a $10\%$

return on this project.

a$.$ Calculate the accounting break$-$even point. What is the degree of operating

leverage at 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.