Question
We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $864,000, 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 71,000 units per year Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 35%, and we require a 10% return on this project. Given the prevailing market rates, there is a potential that returns on this project could be 10% better, or 10% worse, than the base projection
1. Calculate the accounting break-even for the base case.
2. Calculate the base cash flow and NPV
3. Calculate the accounting break-even for the worst case:
4. Calculate the worst case cash flow and NPV.
5 Calculate the accounting break-even for the best case
6. Calculate the best case cash flow and NPV
7 Given all of this information, would you proceed with this project Justify your response.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started