We are evaluating a project that costs $957,000, has a life of 13 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 153,000 units per year. Price per unit is $44, variable cost per unit is $24, and fixed costs are $958,914 per year. The tax rate is 24 percent, and we require a return of 12 percent on this project.

1a. Calculate the accounting break-even point.

b. What is the degree of operating leverage and the accounting break even point? c. Calculate the base case cash flow

2a. Calculate the NPV

b. What is the sensitivity of NPV to changes in the quantity sold

c.What does the answer in 2b tells about a 500unit decrease in the quantity sold (NPV drop)

d. What is the sensitivity of OCF to changes in the variable cost figures.

e. How much will OCF change if Variable costs decrease by $1