Question: Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $571,800, has a six-year life, and has no salvage value.
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Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $571,800, 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 80,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $685,000 per year. The tax rate is 23 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 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b-1.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., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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. Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $571,800, 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 80,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $685,000 per year. The tax rate is 23 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 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b-1.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., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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
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