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WWe are evaluating a project that costs $ 1 , 8 6 0 , 0 0 0 , has a 6 - year life, and

WWe are evaluating a project that costs $1,860,000, has a 6-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 89,300 units per year. Price per unit is $38.31, variable cost per unit is $23.50, and fixed costs are $833,000 per year. The tax rate is 21 percent, and we require a return of 9 percent on this project.
Calculate the base-case operating cash flow and NPV.
What is the sensitivity of NPV to changes in the sales figure?
If there is a 450-unit decrease in projected sales, how much would the NPV change?
What is the sensitivity of OCF to changes in the variable cost figure?
If there is a $1 decrease in estimated variable costs, how much would the OCF change?

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