Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We are evaluating a project that costs $571,800, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over

image text in transcribed
image text in transcribed
We are evaluating a project that costs $571,800, 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 80,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $685,000 per year. The tax rate is 23 percent, and we require a return of 11 percent on this project. a-1. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a. What is the degree of operating leverage at the accounting break-even point? (Do 2. not round, intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e. 32.16.) 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. ) units a-1. Break-even point a-2. DOL b-1. Cash flow NPV b-2. ANPVIAQ C. AOCFIAVC

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

Advances In International Accounting Volume 20

Authors: J. Timothy Sale

1st Edition

0762313994, 9780762313990

More Books

Students also viewed these Accounting questions

Question

summarize the history of work psychology;

Answered: 1 week ago

Question

When should you avoid using exhaust brake select all that apply

Answered: 1 week ago

Question

8. Describe the main retirement benefits.

Answered: 1 week ago