U] vcu laUlCD .' Sensitivity Analysis and Break-Even [L01, 3] We are evaluating a project that costs $786,000, has an eight-year life, and has no salvage value. Assume that depreciation is straightline to zero over the life of the project. Sales are projected at 65,000 units per year. Price per unit is $48, variable cost per unit is $25, and fixed costs are $725,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. 3. Calculate the accounting breakeven point. What is the degree of operating leverage at the accounting break-even point? b. Calculate the basecase cash flow and NPV. What is the sensitivity of NPV to changes in the Page 377 quantity sold? Explain what your answer tells you about a 500-unit decrease in the quantity sold. 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. 'I