We are evaluating a project that costs $848,000, 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 62,000 units per year. Price per unit is $40, variable cost per unit is $24, and fixed costs are $636,000 per year. The tax rate is 24 percent, and we require a return of 20 percent on this project.

a. Calculate the accounting break-even point.(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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.)

b-3. Calculate the change in NPV if sales were to drop by 500 units.(Enter your answer as a positive number. Do not round 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?

(only need b-3, other answers are correct)

a.

Break-even point 46,375.00 units

b-1.

Cash flow $296,000

NPV $287,799.30

b-2.

NPV/Q $46.660

b-3.

NPV would "decrease" by $-------------

c.

OCF/VC $ -47,120