Question
We are evaluating a project that costs $660,000, has a life of5 years, and has no salvage value. Assume that depreciation is straight-line to zero
We are evaluating a project that costs $660,000, has a life of5 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 58,000 units per year. Price per unit is $58, variable cost per unit is $38, and fixed costs are $660,000 per year. The tax rate is 22 percent and we require a return of 15 percent on this project.
a.Calculate the accounting break-even point.(Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
b-1.Calculate the base-case cash flow and NPV.(Do not round intermediate calculations and round your NPV answer to 2 decimal places, e.g., 32.16.)b-2.What is the sensitivity of NPV to changes in the sales figure?(Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)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.)
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