Answered step by step
Verified Expert Solution
Question
1 Approved Answer
We are evaluating a project that costs $874,800, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $874,800, has a nine-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 85,000 units per year. Price per unit is $55, variable cost per unit is $39, and fixed costs are $765,000 per year. The tax rate is 24 percent, and we require a return of 11 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32 . Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. 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? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) calculations and round your answer to the nearest whole number, e.g., 32.) \begin{tabular}{|l|l|l|l|} \hline eBook & a-1. Break-even point & & units \\ \hline a-2. DOL & & \\ \hline b-1. Cash flow & & \\ \hline b-1. NPV & & \\ \hline b-2. NPV/ Q & & \\ \hline c. OCF/ VC & & \\ \hline \end{tabular}
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