Problem $11-5$ Sensitivity Analysis and Break$-$Even $[$LO$1,3]$

We are evaluating a project that costs $$874,800,$ has a nine$-$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 $85,000$ units per year. Price per unit is $$55,$ variable cost per unit is $$39,$

and fixed costs are $$765,000$ per year. The tax rate is $24$ percent, and we require a

return of $11$ percent on this project.

a$-1.$ Calculate the accounting break$-$even point. $($Do not round intermediate calculations

and round your answer to the nearest whole number, e$.$g$.,32.)$

a$-$ What is the degree of operating leverage at the accounting break$-$even point? $($Do

not round intermediate calculations and round your answer to $3$ decimal places,

e$.$g$.,32\mathrm{.}161.)$

b$-$ Calculate the base$-$case cash flow and NPV$.($Do not round intermediate

calculations. Round your cash flow answer to the nearest whole number, e$.$g$.,32.$

Round your NPV answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$-$ What is the sensitivity of NPV to changes in the quantity sold? $($Do not round

intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

c$.$ What is the sensitivity of OCF to changes in the variable cost figure? $($A negative

answer should be indicated by a minus sign. Do not round intermediate

calculations and round your answer to the nearest whole number, e$.$g$.,32.)$