Problem $7-1$ Sensitivity Analysis and Break$-$Even Point

We are evaluating a project that costs $$650,000,$ has a life of $5$ years, and has no

salvage value. Assume that depreciation is straight$-$line to zero over the life of the

project. Sales are projected at $45,000$ units per year. Price per unit is $$56,$ variable cost

per unit is $$26,$ and fixed costs are $$860,000$ per year. The tax rate is $21$ percent, and we

require a return of $14$ percent on this project.

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

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

b$-1.$ Calculate the base$-$case cash flow and NPV$.($Do not round intermediate

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

b$-2.$ What is the sensitivity of NPV to changes in the sales figure? $($Do not round

intermediate calculations and round your answer to $3$ decimal places, e$.$g$.,$

$32\mathrm{.}161.)$

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$.,32.)$