1) BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year. In addition to the BASIC INFORMATION, you expect the number of units sold to be 7,000 with an upper bound of 8,000 and a lower bound of 6,000, and you expect the variable cost per unit to be $10 per unit with an upper bound of $12.50 and a lower bound of $7.50. Assuming a tax rate of 30%, compute the IRR for the BEST case. Note that salvage is $0, and NWC is $0. A. 5% B. 12% C. 17% D. 34% E. 74%

2)

The company is conducting a sensitivity analysis on the sales price using a sales price

estimate of $23. What are the earnings before interest and taxes?

A. $38,000

B. $44,000

C. $50,000

D. $59,500

E. $65,000

3)A firm is reviewing a project that has fixed costs of $123,500, variable costs of $189,700,

sales of $427,600, and a 34% marginal tax rate. The project has no initial cash requirements.

What is the degree of operating leverage for this project?

A. .61

B. 1.22

C. 1.61

D. 1.64

E. 2.64

4) TD, Inc. is analyzing a new project. The data they have gathered to date is as follows:

What is the degree of operating leverage under the base-case scenario?

A. .69

B. 1.58

C. 1.69

D. 1.85

E. 1.99

Initial requirement for equipment:	$80,000
Depreciation:	Straight-line to zero over the two-year life of the Project with no salvage value.
Required rate of return:	12%
Marginal tax rate:	34%

	Expected Value	Range
Sales quantity	12000	10.00%
Sales price per unit	$21	5%
Variable cost per unit	$11	3%
Fixed cost	$44,000	1%