Question $2$

The base case projections for a new one$-$year project show sales of $8,500$ units, variable costs per unit of

$$28\mathrm{.}62,$ and fixed costs of $$164,000.$ Depreciation is $$62,000$ and the tax rate is $23$ percent. The sale price is

$$55$ a unit. The company uses the base case as the starting point for its sensitivity analysis.

What is the operating cash flow when performing a sensitivity analysis which raises fixed costs to $$170,000?$

$$62,406\mathrm{.}67$

$$58,219\mathrm{.}90$

$$61,311\mathrm{.}07$

$$56,017\mathrm{.}10$

$$52,048\mathrm{.}50$

Question $3$

You are considering a new product launch. The project will have an initial cost for fixed assets of $$1,150,000,a$

three$-$year life, and no salvage value; depreciation is straight$-$line to zero. Sales are projected at $230$ units per

year, price per unit will be $$7,500,$ variable cost per unit will be $$3,900,$ and fixed costs will be $$122,000$ per

year. The required return is $14\mathrm{.}5$ percent and the relevant tax rate is $24$ percent.

Based on your experience, you think the unit sales and price are accurate within a $+-2$ percent range while costs

may vary by $+-3$ percent.

What is the worst$-$case NPV$?$

$-$$$118,020$

$$162,134$

$-$$$117,907$

$$156,446$

$-$$$78,517$

Question $4$