We are evaluating a project that costs $1.68 million, 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 90,000 units per year. Price per unit is $37.95, variable cost per unit is $23.20, and fixed costs are $815,000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. Do not round any calculations

a.Calculate the base-case cash flow and NPV.

b.What is the sensitivity of NPV to changes in the sales figure?

c.If there is a 500-unit decrease in projected sales, how much would the NPV change?

d.What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign)

e.If there is a $1 decrease in estimated variable costs, how much would the increase in OCF be?