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We are evaluating a project that costs $832,000, has an eight year life, and has no salvage value. Assume that depreciation is straight-line to zero
We are evaluating a project that costs $832,000, 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 40,000 units per year. Price per unit is $40.00, variable cost per unit is $15.00, and fixed costs are $728,000 per year. The tax rate is 35 percent, and we require a return of 18 percent on this project.
-What is the break even point in units?
-Calculate the base-case cash flow and NPV
-What is the sensitivity of NPV to changes in the sales figures?
-Calculate the change in NPV if sales were to drop by 500 units.
-What is the sensitivity of OCF to changes inthe variable cost figure?
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