We are evaluating a project that costs 940,000 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 88,000 units per year. Price per unit is 34.75, variable costs per unit is 21.00, and fixed costs are 760,000 per year. The tax rate is 13 percent on this project.

Requirement 1.

Calculate the base-case cash flow and NPV.

Requirement 2.

What is the sensitivity of NPV to changes in sales figure?

Requirement 3.

If there is a 500-unit decrease in the projected sales, how much would NPV drop?

Requirement 4.

WHat is the sensitivity of OCP to changes in variable cost figure?

Requirement 5.

If there is $1 decrease in estimated variable costs, how much would the increase in OCF be?