Sensitivity Analysis and Break-Even Point

Problem 9-1 Sensitivity Analysis and Break-Even Point We are evaluating a project that costs $1,140,000, has a ten-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 54,000 units per year. Price per unit is $50, variable cost per unit is $20, and fixed costs are $741,000 per year. The tax rate is 35 percent, and we require a return of 18 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.) Break-even point 28500 units 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. Cash flow NPV 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.) NPV would decrease by $ 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.) AOCF/AVC $35100