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What's wrong with this ? We are evaluating a project that costs $604,100, has a seven-year life, and has no salvage value. Assume that depreciation
What's wrong with this ?
We are evaluating a project that costs $604,100, has a seven-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 90,000 units per year. Price per unit is $44, variable cost per unit is $31, and fixed costs are $710,000 per year. The tax rate is 23 percent, and we require a return of 12 percent on this project. a- Calculate the accounting break-even point. (Do not round intermediate 1. 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.) Answer is complete but not entirely correct. a- 1. Break-even point 61,254 units DOL 9.227 a 2. b- 1. Cash flow $ 374 X NPV $ 1,102,984.83 b- 2. ANPVIAQ $ 45.68 C. AOCFIAVC $ -69 XStep by Step Solution
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