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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
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. a-1. Calculate the accounting break-even point. (Round the final answer to 2 decimal places.) Break even point units a-2. What is the degree of operating leverage at the accounting break-even point? (Round the final answer to 3 decimal places.) DOL b-1. Calculate the base-case cash flow and NPV. (Round the final NPV answers to 2 decimal places. Omit $ sign in your response.) Cash flow ANPV b-2. What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations. Round the final answer to 3 decimal places. Omit $ sign in your response.) ANPV/AQ $ c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.) AOCF/AVC $
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