Question: We are evaluating a project that costs $1,830,000, has a 6 -year life, anc value. Assume that depreciation is straight-line to zero over the life

 We are evaluating a project that costs $1,830,000, has a 6

We are evaluating a project that costs $1,830,000, has a 6 -year life, anc value. Assume that depreciation is straight-line to zero over the life of t are projected at 88,600 units per year. Price per unit is $38.25, variablt $23.45, and fixed costs are $830,000 per year. The tax rate is 25 require a return of 9 percent on this project. a. Calculate the base-case operating cash flow and NPV. (Do not round calculations and round your answers to 2 decimal places, e.g., 32.1 b. What is the sensitivity of NPV to changes in the sales figure? (Do not r intermediate calculations and round your answer to 3 decimal place c. If there is a 400-unit decrease in projected sales, how much would the (A negative answer should be indicated by a minus sign. Do not rou intermediate calculations and round your answer to 2 decimal place d. What is the sensitivity of OCF to changes in the variable cost figure? ( answer should be indicated by a minus sign. Do not round intermed calculations and round your answer to the nearest whole number, e e. If there is a $1 decrease in estimated variable costs, how much would change? (Do not round intermediate calculations and round your an nearest whole number, e.g., 32.)

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 Accounting Questions!