Question: We ace evaluating a project that costs $1,890.000, has a 6-year iffe, and has no salvage value. Assume that depreciation is straight-line to zero over
We ace evaluating a project that costs $1,890.000, has a 6-year iffe, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 89.400 units per year. Price per unit is $38.37, variable cost per unit is $23.55, and fixed costs are $836,000 per yeat. The tax rate is 22 percent, and we require a return of 9 percent on this project. o. Caiculate the base-case operating cash flow and NPV. Note: Do not round intermediate caleulations and round your answers to 2 decimal ploces, e.9., 32.16. b. What is the sensitivity of NPV to changes in the sales figure? Note: Do not round intermediate calculotions and round your answer to 3 decimal places, e.9., 32.161. c. If there is a 500 -unit decrease in projected sales, how much would the NPV change? Note: A negotive answer should be indieated by o minus sign. Do not round intermediote calculotions and round your answer to 2 decimal ploces, e.9.3.32.16. d. What is the sensitivity of ocf to changes in the vartable cost figure? Note: A negative answer should be indiceted by a minus aign. Do not round intermediate calculations and round your answer to the nenrest whole number, 0.9432. 6. If there h o s1 deciesse in estimated variable costs, hiow much would the OCF change? Notes Do not round intermediote caleulations and round your answer to the nearest whole number, e.g. 32
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
