Question: We are evaluating a project that costs $ 1 , 1 8 0 , 0 0 0 , has a life of 1 0 years,

We are evaluating a project that costs $1,180,000, has a life of 10 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 59,000 units per year. Price per unit is $45, variable cost per unit is $25, and fixed costs are $750,000 per year. The tax rate is 25 percent, and we require a return of 14 percent on this project.
1. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g.,32.)
2. 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.)
3. 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.)
4. 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.)
My third time having to ask this question on here, please please answer it correctly.
 We are evaluating a project that costs $1,180,000, has a life

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!