Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We are evaluating a project that costs $739,600, has an eight-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 $739,600, has an eight-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 $49, variable cost per unit is $34, and fixed costs are $735,000 per year. The tax rate is 23 percent, and we require a return of 9 percent on this project. points eBook References 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-1.Calculate the base-case cash flow and NPV. (Do not round Intermediate 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.g., 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 22. DOL b-1. Cash flow NPV b-2 ANPVIAQ 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

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

Public Finance

Authors: Harvey Rosen, Ted Gayer

10th edition

9781259716874, 78021685, 1259716872, 978-0078021688

More Books

Students also viewed these Finance questions