Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We are evaluating a project that costs $2,160,000, has a 8 -year life, and has no salvage value. Assume that depreciation is straight-line to zero

image text in transcribed
We are evaluating a project that costs $2,160,000, has a 8 -year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Saies are projected at 90,900 units per year. Price per unit is $38.91, variable cost per unit is $24.00, and fixed costs are $863.000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow and NPV. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16. b. What is the sensitivity of NPV to changes in the sales figure? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.9. 32.161. c. If there is a 400-unit decrease in projected sales, how mach would the NPV change? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.9. 32.16 . d. What is the sensitivity of OCF to changes in the variable cost figure? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and

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_2

Step: 3

blur-text-image_3

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

Wealth Inequality Asset Redistribution And Risk Sharing Islamic Finance

Authors: Tarik Akin , Abbas Mirakhor

1st Edition

3110583739, 3110583887, 9783110583885

More Books

Students also viewed these Finance questions

Question

Name several nonbusiness applications of survey research.

Answered: 1 week ago