You are considering a new product launch. The project will cost $2,150,000, have a 4-year life, and have no salvage value; depreciation is straight-line to 0. Sales are projected at 150 units per year; price per unit will be $28,000; variable cost per unit will be $17,000; and fixed costs will be $580,000 per year. The required return on the project is 12%, and the relevant tax rate is 35%.

a. Based on your experience, you think the unit sales, variable cost, and fixed cost projections given here are probably accurate to within 10%. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios?

b. Evaluate the sensitivity of your base-case NPV to changes in fixed costs. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 3 decimal places. Omit $ sign in your response.)

c. What is the cash break-even level of output for this project (ignoring taxes)? (Round the final answers to the nearest whole unit.)

d-1. What is the accounting break-even level of output for this project? (Round the final answers to the nearest whole unit.)

d-2. What is the degree of operating leverage at the accounting break-even point? (Round the final answer to 4 decimal places.)

Degree of operating leverage=

\begin{tabular}{|c|c|c|c|c|c|c|c|} \hline \multicolumn{3}{|c|}{ Variable Cost } & \multicolumn{3}{|c|}{ Fixed Costs } & \multicolumn{2}{|c|}{ NPV } \\ \hline$ & 17000 & & $ & 580000 & & $ & 533877.82 \\ \hline$ & 18700 & x & $ & 638000 & x & $ & 587265.60 \\ \hline$ & 15300 & x & $ & 522000 & x & $ & 480490.04 \\ \hline \end{tabular}