We are evaluating a project that costs $724,000, has an 11-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 122,000 units per year. Price per unit is $36, variable cost per unit is $20, and fixed costs are $736,308 per year. The tax rate is 33 percent, and we require a 15 percent return on this project. Requirement 1: Break-Even (a)Calculate the accounting break-even point. (Do not round your intermediate calculations.) (Click to select) (b)What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations.) (Click to select) Requirement 2: Base-Case & NPV Sensitivity (a) Calculate the base-case operating cash flow. (Do not round your intermediate calculations.) (Click to select) (b)Calculate the base-case NPV. (Do not round your intermediate calculations.) (Click to select) (c) What is the sensitivity/elasticity of NPV to changes in the sales figure? Recall from your economics class that an elasticity measures a percentage change in one variable due to a percentage change in another. So simply increase sales quantity by 1 percent, calculate the new NPV, and then calculate the percentage change in the NPV. (Do not round your intermediate calculations.) [(Click to select) (d)Based on this sensitivity, what is the change in NPV (in dollars) If there is a 7 percent decrease in projected sales? (Do not round your intermediate calculations.) Click to select) Requirement 3: Sensitivity of OCF (a)in addition to NPV, we can calculate the sensitivity of other things, such as OCF. What is the sensitivity of base-case OCF to changes in the variable cost? Estimate the sensitivity by increasing variable costs by 10% (Do not round your intermediate calculations.) [Click to select) (b)Based on this sensitivity, estimate the change in OCF (in dollars) given a 9% decrease in the variable costs? (Do not round your intermediate calculations.) Click to select) Requirement 1: Break-Even (a)Calculate the accounting break-even point. (Do not round your intermediate calculations.) of operating leverage at the accounting break-even point? (Do not diate calculations.) (Click to seleon 49,033 units (1 48,019 units 50,133 units 51,133 units 46,019 units R Case & NPV Sensitivity rating cach flow Do not round your intermediate (b)What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations.) Click to select 12.287 R 1.092 Case & NPV Sensitivity case operating cash flow. (Do not round your intermediate 12.187 1.189 12.087 Requirement 2: Base-Case & NPV Sensitivity (a)Calculate the base-case operating cash flow. (Do not round your intermediate calculations.) (1 case NPV. (Do not round your intermediate calculations.) Click to select) $836,234 $816,234 $389,459 $856,234 $379,459 ity/elasticity of NPV to changes in the sales figure? onomics class that an elasticity measures a percentage change in (b)Calculate the base-case NPV. (Do not round your intermediate calculations.) (Click to select $3,652,606 $389,459 $3,642,606 $3,662,606 $379,459 ty/elasticity of NPV to changes in the sales figure? onomics class that an elasticity measures a percentage change i a percentage change in another. So simply increase sales quantit ate the new NPV, and then calculate the percentage change in the your intermediate calculations.) (c)What is the sensitivity/elasticity of NPV to changes in the sales figure? Recall from your economics class that an elasticity measures a percentage change in one variable due to a percentage change in another. So simply increase sales quantity by 1 percent, calculate the new NPV, and then calculate the percentage change in the NPV. (Do not round your intermediate calculations.) (Click to selec 1.874 56.005 ( 30.27 itivity, what is the change in NPV (in dollars) if there is a 7 percent ed sales? (Do not round your intermediate calculations.) 56.205 4.674 (d)Based on this sensitivity, what is the change in NPV (in dollars) if there is a 7 percent decrease in projected sales? (Do not round your intermediate calculations.) (Click to select -$479,140 -$-607 R $378,459 -$379,459 $479,140 tivity of OCF we can calculate the sensitivity of other things, such as OCF. What base-case OCF to changes in the variable cost? Estimate the asing variable costs by 10%. (Do not round your intermediate Requirement 3: Sensitivity of OCF (a) In addition to NPV, we can calculate the sensitivity of other things, such as OCF. What is the sensitivity of base-case OCF to changes in the variable cost? Estimate the sensitivity by increasing variable costs by 10%. (Do not round your intermediate calculations.) ( (Click to select) -1.95 -1,020 -25,002 tivity, estimate the change in OCF (in dollars) given a 9% decrease $? (Do not round your intermediate calculations.) 980 32,980 (b)Based on this sensitivity, estimate the change in OCF (in dollars) given a 9% decrease in the variable costs? (Do not round your intermediate calculations.) Click to select $147,132 $1,018 $52,133 $51,133 $-982
