Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are are evaluating a project that costs $1,140,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero

You are are evaluating a project that costs $1,140,000, has a ten-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 54,000 units per year. Price per unit is $50, variable cost per unit is $20, and fixed costs are $741,000 per year. The tax rate is 35 percent, and we require a return of 18 percent on this project. Calculate the sensitivity of NPV to changes in the sales figure, changes in NPV if sales were to drop by 500 units, and sensitivity of OCF to changes in variable figure cost.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Finance Theory and Policy

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

10th edition

978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648

More Books

Students also viewed these Finance questions