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We are evaluating a project that costs $1,675,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $1,675,000, has a six-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 91,000 units per year. Price per unit is $35.95, variable cost per unit is $21.40, and fixed costs are $775,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project. Requirement 1: Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Base-case cash flow NPV Requirement 2: What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).) Sensitivity of NPV $ Requirement 3: If there is a 500-unit decrease in projected sales, how much would the NPV drop? (Do not round intermediate calculations. Input your answer as a positive value. Round your answer to 2 decimal places (e.g., 32.16).) NPV drop Requirement 4: What is the sensitivity of OCF to changes in the variable cost figure? (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) Sensitivity of OCF Requirement 5: If there is a $1 decrease in estimated variable costs, how much would the increase in OCF be? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount (e.g., 1,234,567).) Increase in OCF
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