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 $700,000 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 pointunits

b-1Calculate 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$NPV$

b-2What 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.)

NPV/Q$

b-3Calculate the change in NPV if sales were to drop by 500 units.(Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV would

(Click to select)

decrease

increase

by $

c.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.)

OCF/VC$