Question: ABC Inc. is analyzing a new project. The data they have gathered to date is as follows: Expected Value Range Sales quantity Sales price

ABC Inc. is analyzing a new project. The data they have gathered  

ABC Inc. is analyzing a new project. The data they have gathered to date is as follows: Expected Value Range Sales quantity Sales price per unit Variable cost per unit Fixed cost 17,500 $30 12.00% 10% $20 5% $30,000 5% Initial requirement for equipment: S65,000 Straight-line to zero over the 2-year life of the project with no salvage value. Depreciation: Required rate of retum: 11% Marginal tax rate: 35% a) What is the base-case operating cash flow? b) What is the base case NPV for the project? c) What is the worst case NPV for the project? d) What is the best case NPV for the project? e) Suppose you want to conduct a sensitivity analysis for the possible changes in unit sales. What is the IRR when the sales level equals 15,500 units? f) Suppose you are interested in the project's sensitivity to unit price. What is the NPV at a price of $33.00 per unit? g) What is the base case accounting break-even point? h) What is the base case cash break-even point? i) What is the base case financial break-even point? Ignore taxes j) What is the degree of operating leverage under the base-case scenario?

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