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We are evaluating a project that costs $865,000, has a fourteen-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $865,000, has a fourteen-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 129,000 units per year. Price per unit is $44, variable cost per unit is $25, and fixed costs are $879,705 per year. The tax rate is 36 percent, and we require a 14 percent return on this project. Requirement 1: Calculate the accounting break-even point.(Round your answer to the nearest whole number. (e.g., 32)) Requirement 2: (a)Calculate the base-case cash flow and NPV.(Do not include the dollar signs (\$). Round your answers to 2 decimal places. (e.g., 32.16)) (b)What is the sensitivity of NPV to changes in the sales figure? (Do not include the dollar sign (\$). Round your answer to 3 decimal places. (e.g., 32.161)) (c) Calculate the change in NPV If there is a 500-unit decrease in projected sales. (Do not include the dollar sign (\$). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16)) Requirement 3: (a)What is the sensitivity of OCF to changes in the variable cost figure? (Do not include the dollar sign (\$). Negative amount should be indicated by a minus sign. Round your answer to the nearest whole number. (e.g., 32)) (b)Calculate the change in OCF if there is a $1 decrease in estimated variable costs. (Do not include the dollar sign (\$). Round your answer to the nearest whole number. (e.g., 32))
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