PLZ Solve Question $21.$ ONLY Question $21$

Sensitivity Analysis We are evaluating a project that costs $$1\mathrm{.}68$ million,

has a six$-$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 $90,000$

units per year. Price per unit is $$37\mathrm{.}95,$ variable cost per unit is $$23\mathrm{.}20,$ and

fixed costs are $$815,000$ per year. The tax rate is $21$ percent, and we require a

return of $11$ percent on this project.

a$.$ Calculate the base$-$case cash flow and NPV$.$ What is the sensitivity of

NPV to changes in the sales figure? Explain what your answer tells you

about a $500-$unit decrease in projected sales.

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

Explain what your answer tells you about a $$1$ decrease in estimated

variable costs.

Scenario Analysis In the previous problem, suppose the projections given

for price, quantity, variable costs, and fixed costs are all accurate to within

$+-10$ percent. Calculate the best$-$case and worst$-$case NPV figures.