Question: W e are evaluating a project that costs $ 2 , 1 9 0 , 0 0 0 , has a 8 - year life,

We are evaluating a project that costs $2,190,000, has a8-year life, and has no salvage value. Assume that depreciation is straight-line
to zero over the life of the project. Sales are projected at91,200 units per year. Price per unit is $38.97, variable cost per unit is $24.05,
and fixed costs are $866,000 per year. The tax rate is22 percent, and we require a return of11 percent on this project.
a. Calculate the base-case operating cash flow and NPV.
Note: Do not round intermediate calculations and round your answers to2 decimal places, e.g.,32.16.
b. What is the sensitivityofNPVto changes in the sales figure?
Note: Do not round intermediate calculations and round your answer to3 decimal places, e.g.,32.161.
c.If there isa350-unit decrease in projected sales, how much would the NPV change?
Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your
answer to2 decimal places, e.g.,32.16.
d. What is the sensitivityof OCF to changes in the variable cost figure?
Note: 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.
e.If there isa $1 decrease in estimated variable costs, how much would the OCF change?
Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.
 We are evaluating a project that costs $2,190,000, has a8-year life,

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