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Use the following case information for the project below: Uniball Corp. has a project that costs $850,000, has a life of five years, and has
Use the following case information for the project below: Uniball Corp. has a project that costs $850,000, has a life of five years, and has a salvage value of $150,000. Depreciation is a straight line to zero. The required return is 15% and the tax rate is 34%. Sales of 3,550 units per year. Price per unit is $500. Variable costs per unit are $300 and fixed costs are $250,000 per year. Note that the cost is $190,000 per year and the engineering department estimates you will need an initial net working capital investment of $70,000. a) Scenario Analysis If estimates of sales quantities, prices, variable costs, and fixed costs are given accurate by 7%. 1) Determine the best and worst case 2) Determine the base scenario for the project's NPV 3) Determine the NPV of the project in best and worst case scenario b) Sensitivity Analysis Calculate the sensitivity of OCF to changes in the variable cost in the base-case scenario c) Break-even Analysis Based on the base case scenario of the above case, calculate the cash break-even point, accounting break-even, and financial break-even of the case. d) Operating Leverage Calculate the degree of operating leverage in the base case scenario
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