We are evaluating a project that costs $644,000, has an eight-year life, and has no salvage value. Assume that deprecation is straight-line to zero over the life of the project. Sales are projected at 70,000 units per year. Price per unit is $37, variable cost per unit is $21, and fixed costs are $725, 000 per year. The tax rate is 35% and we require a 15 percent return on this project.

1. a) Calculate the accounting break even point.
2. b) Calculate the base-case cash flow and NPV. What is the sensitive of NPV to changes in the sales figure? Explain what you answer tells you about a 500-unit decrease in projected sales.
3. c) What is the sensitivity of operating cash flows to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in the estimated variable costs.
4. d) Suppose projections give for price, quantity, variable costs , and fixed costs are accurate to within +/- 10 percent. Calculate the "best" and "worst" case scenario.