Question
You are evaluating a project with initial investment costs of $1,355,000, has a 4-year life and has no salvage value. Assume that depreciation is straight-line
You are evaluating a project with initial investment costs of $1,355,000, has a 4-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 50,000 units per year. Price per unit is $52, variable cost per unit is $31, and fixed costs are $920,000 per year. The tax rate is 25%, and this project risk level require 21.5% return.
a. Calculate the scenario analysis values +/- 15% for worst and best case!
b. Calculate accounting break even point for base case, worst case and best case! (hints: depreciation cost doesnt change on every case).
c. What is the degree of operating leverage (DOL) at the accounting break-even point?
d. What is the Cash break-even of that project?
e. What is the Financial break-even of that Project?
Please help me ASAP because I'm in the middle of an exam. Thank you in advance!
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