Question: We are evaluating a project that costs $2.220.000, has a 8-year ilfe, and has no salvage value. Assume that depreciation is straightIIne to zero over
We are evaluating a project that costs $2.220.000, has a 8-year ilfe, and has no salvage value. Assume that depreciation is straightIIne to zero over the life of the project. Sales are projected at 94,700 units per year. Price per unit is $39.03, variable cost per unit is $24.10, and fixed costs are $869,000 per yeat. The tax rate is 23 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow and NPV. Note: Do not round intermediate calculotions and round your answers to 2 decimal places, e.9., 32.16. b. What is the sensitivity of NPV to changes in the sales figure? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. If there is a 300-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 to 2 decimal places, e.9. 32.16. d. What is the sensitivity of OCF to changes in the varlable 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 is a $1 decrease in estimated variable costs, how much would the OCF change? Note: Do not round intermediate calculotions and round your answer to the nearest whole number, e.g., 32
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