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We are evaluating a project that costs $854,000, has an 15 year lie, and has no salvage valoe. Assume that depreciation is straight line to

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We are evaluating a project that costs $854,000, has an 15 year lie, and has no salvage valoe. Assume that depreciation is straight line to zero over the life of the project. Sales are projected at 121,000 units per year. Price per unit is $41, variable cost per unit is $24, and fixed costs are $859.24 per year, The tax rate is 33 percent, and we require a 17 percent return on this project Requirement 1 : Break-Even (a) Calculate the accounting break-even point. (Do not rouind your intermediate calculations.) (b)What is the degree of operating leverage at the accounting break-even point? (Do not round your intermediate calculations) Requirement 2: Base-Case \& NPV Sensitivity (a) Calculate the base-case operating cash flow. (Do not round your intermediate calculations.) (b) Calculate the base-case NPV, (Do not round 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 caleutetions.) (d) Based on this sensitivity, what is the change in NPV (in dollars) if there is a 8 percent decrease in projocted soles? (Do not round your intermediate calculetions) Requirement 3: Sensitivity of OCF (a) addition to NPV, we can calculate the sensutivity 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 cosis by 10h. 00 not round your intermediate calculations? (b) Based on this sensitivity, estimate the change in OCF in dollars) given a 138 decrease in the varleble costs? (Do not round your intermediate calculations.)

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