Answered step by step
Verified Expert Solution
Question
1 Approved Answer
We are evaluating a project that costs $1,180,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $1,180,000, 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 66,000 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 35 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do not round Intermediate calculations and round your final answer to nearest whole number (e.g., 32).) Break-even point units b-1 Calculate the base-case cash flow and NPV. (Do not round Intermedlate 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 final answer to 3 decimal places (e.g., 32.161).) ANPV/AQ b-3 Calculate 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 v] by $ 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 and round your final answer to nearest whole number (e.g., 32).) AOCF/AVC
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started