Question: We are evaluating a project that costs $1,830,000, has a 6 -yeor life, and has no salvage value. Assume that depreciation is straight tine to
We are evaluating a project that costs $1,830,000, has a 6 -yeor life, and has no salvage value. Assume that depreciation is straight tine to revo over the life of the project. 5ales are projected at 88,600 units per vear. Price per ung is $38.25, variable cost per unit is $23,45, and fincd costs are $830,000 per year. The tax rate is 25 percent, and we require a return of 9 percent on inis project. a. Calculate the base-case oporating cosh fow and NPV. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.9.4 32.16. b. Whist ts the sensinity of Nipy' to changes in the sales figute? Note: Oo not round intermediate calculations and round your answer to 3 decimal places, e.9., 32,161. c. If there is a 400 -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 Intermed iate calculations and round your answer to 2 decimal places, 0.9,32.16. d. What is the sensithity of 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.9.,32. e. If there is a 51 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
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