Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We are evaluating a project that costs $732,000. has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over

image text in transcribed

We are evaluating a project that costs $732,000. 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 55.000 units per year. Price per unit is $60. variable cost per unit is $30. and fixed costs are $640,000 per year. The tax rate is 35 percent, and we require a 12 percent return on this project.a-1 Calculate the accounting break-even point. Break-even point units a-2 What is the degree of operating leverage at the accounting g break-even point? (Round your answer to 3 decimal places, (e.g., 32.161)) DOL b-1 Calculate the base-case cash flow and NPV. (Round your NPV answer to 2 decimal places, (e.g.,32.16)) Cash flow $ 699.200 NPV $ 2,142,696 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)) DeltaNPV/DeltaQDelta $ 80.17 c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)DeltaOCF/DeltaVC $ 35.750 We are evaluating a project that costs $732,000. 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 55.000 units per year. Price per unit is $60. variable cost per unit is $30. and fixed costs are $640,000 per year. The tax rate is 35 percent, and we require a 12 percent return on this project.a-1 Calculate the accounting break-even point. Break-even point units a-2 What is the degree of operating leverage at the accounting g break-even point? (Round your answer to 3 decimal places, (e.g., 32.161)) DOL b-1 Calculate the base-case cash flow and NPV. (Round your NPV answer to 2 decimal places, (e.g.,32.16)) Cash flow $ 699.200 NPV $ 2,142,696 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)) DeltaNPV/DeltaQDelta $ 80.17 c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)DeltaOCF/DeltaVC $ 35.750

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

Step: 3

blur-text-image

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

Municipal Finances A Handbook For Local Governments

Authors: Catherine D. Farvacque-Vitkovic, Mihaly Kopanyi

1st Edition

ISBN: 082139830X, 978-0821398302

More Books

Students also viewed these Finance questions