Question: Repost due to wrong answer: We are evaluating a project that costs $756,000, has a six-year life, and has no salvage value. Assume that depreciation
| Repost due to wrong answer: We are evaluating a project that costs $756,000, 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 67,000 units per year. Price per unit is $60, variable cost per unit is $43, and fixed costs are $693,000 per year. The tax rate is 24 percent, and we require a return of 20 percent on this project. |
| a. | Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| 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., 32.16.) |
| 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., 32.161.) |
| b-3. | Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round 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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