We are evaluating a project that costs $583,800, has a six-year life, and has no salvage...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/664995f2cf768_546664995f202c22.jpg)
Transcribed Image Text:
We are evaluating a project that costs $583,800, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $41, variable cost per unit is $27, and fixed costs are $695,000 per year. The tax rate is 25 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. 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.) a-1. Break-even point a-2. DOL b-1. Cash flow b-1. NPV b-2. ANPV/AQ c. AOCF/AVC units We are evaluating a project that costs $583,800, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $41, variable cost per unit is $27, and fixed costs are $695,000 per year. The tax rate is 25 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. 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.) a-1. Break-even point a-2. DOL b-1. Cash flow b-1. NPV b-2. ANPV/AQ c. AOCF/AVC units
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Laval produces lighting fixtures. Budgeted Information for Its two production departments follows. The departments use machine hours (MH) and direct labor hours (DLH). Overhead cost Direct labor...
-
(EPS with Convertible Bonds and Preferred Stock) The Ottey Corporation issued 10-year, $4,000,000 par, 7% callable convertible subordinated debentures on January 2, 2010. The bonds have a par value...
-
A company starts its year with inventory of 2m and ends with 3m. If it had an overall cost of sales of 12.5m, what was its stockturn in days? a. 85 days b. 1,825 days c. 73 days d. 7.3 days
-
A Hamilton cycle that visits every edge _______________ an Euler circuit. Fill in the blank with is or is not to make the statement true.
-
Mario Automobile Company leases automobiles under the following terms. A 3-year lease agreement is signed in which the lessor receives annual rental of $4,000 (in advance). At the end of the three...
-
A student bought a smartwatch that tracks the number of steps she walks throughout the day. The table shows the number of steps recorded t minutes after 3:00 p.m. on the first day she wore the watch....
-
match the correct Ethical Principle (based on the FIVE ethical principles for Professional Accountants listed in APES110). A PUBLIC ACCOUNTANT has a new client that he has completed tax returns for...
-
Go to finance.yahoo and search for bonds (you are free to choose the website of your choosing, Yahoo is not the only one to get a bond quote). Address the following about the bond that you select and...
-
Oriental Corporation has gathered the following data on a proposed investment project ( Ignore income taxes. ) : Investment in depreciable equipment $ 6 8 0 , 0 0 0 Annual net cash flows $ 6 6 , 0 0...
-
Williams Corporation reports the following direct labor information for November: Standard rate $ 31.00 per hour Actual rate paid 31.80 per hour Standard hours allowed for actual production 44,200...
-
Define a class named IntegerList that contains: - An instance data named list, an array of integers. - A constructor that accepts an array size and creates a list of that size. - A getter and setter...
-
You need to estimate a number of portfolios for two different investors and discuss the implications for diversification. Key information on portfolio construction is as follows: Investor utility is...
-
a single rate for the absorption of manufacturing overhead of all production centers is referred to as
-
Identify Thank You mission, strategy and core competencies. Identify strategy changes that have taken place at Thank You since its founding in 2008. Your answer must in text references and must be...
-
Name three edges that you could remove from Graph \(V\) in Figure 12.316 to form a third spanning tree, different from those in the solution to Example 12.50 Exercise 3.
-
Find a minimum spanning tree for the weighted graph. Give its total weight. 37 W 68 49 89 45 68 Weighted Graph 24
-
Physical units and sales value joint cost allocation Featherweight Company makes sterile solutions for administering prescription drugs in hospitals. Most products are manufactured in joint...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App