Question
We are evaluating a project that costs $924,000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $924,000, has a four-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 87,600 units per year. Price per unit is $34.55, variable cost per unit is $20.80, and fixed costs are $756,000 per year. The tax rate is 35 percent, and we require a return of 13 percent on this project.
a) What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
Sensitivity of NPV $ b) If there is a 500-unit decrease in projected sales, how much would the NPV drop? (Input your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV drop $13292.17
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.)
Sensitivity of OCF $
d) If there is $1 decrease in estimated variable costs, how much would the increase in OCF be? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Increase in OCF $
Need a, b and d please. Thank you.
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