Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

value: 14.28 points We are evaluating a project that costs $650,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line

image text in transcribed

value: 14.28 points We are evaluating a project that costs $650,000, has a five-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 47,000 units per year. Price per unit is $56, variable cost per unit is $26, and fixed costs are $860,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project a-1 Calculate the accounting break-even point. (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Break-even point 33000 units a-2 What is the degree of operating leverage at the accounting break-even point? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) DOL b-1 Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) Cash flovw NPV $ 403000 $877687 b-2 What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) ANPVIAQ $73.92 c. What is the sensitivity of OcF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) AOCFIAVC

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

Statistics Modeling And Finance

Authors: Mark A Munizzo, Lisa Virruso Musial

1st Edition

0840049234, 9780840049230

More Books

Students also viewed these Finance questions