Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

undefined We are evaluating a project that costs $1,120,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero

image text in transcribedundefined

We are evaluating a project that costs $1,120,000, has a ten-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 64,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $620,000 per year. The tax rate is 35 percent, and we require a return of 12 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Break-even 32480 units point b-1 Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places, e.g., 32.16.) Cash flow NPV 624200 2406869.20 b-2 What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) ANPVIAQ 91.816 c. What is the sensitivity of OCF to changes in the variable cost figure? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) AOCFIAVC BA -41600

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

Real Estate Finance

Authors: Wolfgang Breuer, Claudia Nadler

2012th Edition

3834934496, 978-3834934499

More Books

Students also viewed these Finance questions

Question

9. Describe the characteristics of power.

Answered: 1 week ago