$15$

Problem $9-20$ Sensitivity Analysis $\left[\begin{array}{cc}O& 3\end{array}\right]$

$5$

points

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References

We are evaluating a project that costs $$2,100,000,$ has a $7-$year life, and has no salvage value. Assume that depreciation is straight$-$line to zero over the life of the project. Sales are projected at $98,600$ units per year. Price per unit is $$37\mathrm{.}79,$ variable cost per unit is $$23\mathrm{.}90,$ and fixed costs are $$857,000$ per year. The tax rate is $24$ percent, and we require a return of $10$ percent on this project.

a$.$ Calculate the base$-$case operating cash flow and NPV$.$

Note: Do not round intermediate calculations and round your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$

b$.$ What is the sensitivity of NPV to changes in the sales figure?

Note: Do not round intermediate calculations and round your answer to $3$ decimal places, e$.$g$.,32\mathrm{.}161.$

c$.$ If there is a $500-$unit decrease in projected sales, how much would the NPV change?

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$

d$.$ What is the sensitivity of OCF to changes in the variable cost figure?

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations an answer to the nearest whole number, e$.$g$.,32.$

e$.$ If there is a $$1$ decrease in estimated variable costs, how much would the OCF change?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.$

a$.$ Base$-$case operating cash flow

Base$-$case NPV

b$.$ NPV sensitivity

c$.$ NPV change

d$.$ OCF sensitivity

e$.$ OCF change