We are evaluating a project that costs $989,000, has an fourteen-year life, and has no salvage value.

Fantastic news! We've Found the answer you've been seeking!

Question:

We are evaluating a project that costs $989,000, has an fourteen-year life, and has no salvage value. Assume thatn depreciation is straight-line to zero over the life of the project.n Sales are projected at 127,000 units per year. Price per unit isn $38, variable cost per unit is $22, and fixed costs are $1,003,835n per year. The tax rate is 34 percent, and we require a 16 percentn return on this project.

Requirement 1:

Calculate the accounting break-even point.(Round yourn answer to the nearest whole number. (e.g., 32))

Break-even point

units

Requirement 2:

(a)

Calculate the base-case cash flow and NPV.(Do notn include the dollar signs ($). Round your answers to 2 decimaln places. (e.g., 32.16))


Base-case cash flow	$
NPV	$

(b)

What is the sensitivity of NPV to changes in the salesn figure? (Do not include the dollar sign ($). Roundn your answer to 3 decimal places. (e.g., 32.161))

Sensitivity of NPV

(c)

Calculate the change in NPV If there is a 500-unit decrease inn projected sales. (Do not include the dollar sign ($).n Negative amount should be indicated by a minus sign. Round yourn answer to 2 decimal places. (e.g., 32.16))

Change in NPV

Requirement 3:

(a)

What is the sensitivity of OCF to changes in the variable costn figure? (Do not include the dollar sign ($). Negativen amount should be indicated by a minus sign. Round your answer ton the nearest whole number. (e.g., 32))

Sensitivity of OCF

(b)

Calculate the change in OCF if there is a $1 decrease inn estimated variable costs. (Do not include the dollarn sign ($). Round your answer to the nearest whole number. (e.g.,n 32))

Change in OCF