Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We are evaluating a project that costs $ 1 , 1 8 0 , 0 0 0 , has a life of 1 0 years,

We are evaluating a project that costs $1,180,000, has a life of 10 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 59,000 units per year. Price per unit is $45, variable cost per unit is $25, and fixed costs are $750,000 per year. The tax rate is 25 percent, and we require a return of 14 percent on this project.
1. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.)
2. 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.)
3. 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.)
4. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.)
My third time having to ask this question on here, please please answer it correctly.
image text in transcribed

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

Handbook Of The Economics Of Finance

Authors: George M. Constantinides, Milton Harris, Rene M. Stulz

1st Edition

044459406X, 978-0444594068

More Books

Students also viewed these Finance questions