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We are evaluating a project that costs $989,000, 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 $989,000, 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 127,000 units per year. Price per unit is $38, variable cost per unit is $22, and fixed costs are $1,003.835 per year. The tax rate is 34 percent, and we require a 16 percent return on this project. Requlrement 1: Calculate the accounting break-even point.(Round your answer to the neerest whole number. (9.9,32)) Requlrement 2 . (a)Calculate the base-case cash flow and NPV.(Do not Include the dollar slgns (\$). Round your enswers to 2 declmal pleces. (e.9., 32.16)) (b)What is the sensitivity of NPV to changes in the sales figure? (Do not Include the doller sign (\$). Round your answer to 3 declmal pleces. (e.g., 32.161)) (c)Calculate the change in NPV If there is a 500-unit decrease in projected sales. (Do not Include the doller sign (\$). Negatlve amount should be Indleated by a minus slgn. Round your answer to 2 declmal pleces. (e.g., 32.16)) Requlrement 3: (a)What is the sensitivity of OCF to changes in the variable cost figure? (Do not include the dollar slgn (\$). Negatlve amount should be Indleated by a minus slgn. Round your answer to the neerest 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 doller slgn (\$). Round your answer to the nearest whole number. (e.g., 32))
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