We are evaluating a project that costs $690,000, has a five-year life, and has no salvage...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
We are evaluating a project that costs $690,000, has a five-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 71,000 units per year. Price per unit is $75, variable cost per unit is $56, and fixed costs are $897,000 per year. The tax rate is 25 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. 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.) b-2. 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.) b-3. Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round 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. Break-even point b-1. Cash flow NPV b-2. ANPV/AQ b-3. NPV would C. AOCF/AVC units by We are evaluating a project that costs $690,000, has a five-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 71,000 units per year. Price per unit is $75, variable cost per unit is $56, and fixed costs are $897,000 per year. The tax rate is 25 percent, and we require a return of 15 percent on this project. a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. 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.) b-2. 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.) b-3. Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round 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. Break-even point b-1. Cash flow NPV b-2. ANPV/AQ b-3. NPV would C. AOCF/AVC units by
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
A 32- resistor and a 20- resistor are connected in parallel, and the combination is connected across a 240-V dc line. (a) What is the resistance of the parallel combination? (b) What is the total...
-
Adel Company debits Supplies Expense for all purchases of supplies and credits Rent Revenue for all advanced rentals. For each type of adjustment, give the adjusting entry.
-
Trend analysis is best described by a. The comparison, across time or to a benchmark, of relationships between financial statement accounts or between an account and nonfinancial data. b. Development...
-
Why is it important for everyone in a business to understand the target market segment?
-
Financial Statement Effects of FIFO and LIFO the management of Tritt Company has asked its accounting department to describe the effect upon the company?s financial position and its income statements...
-
Find lim h(x), if it exists \f
-
A company has fixed costs of $200,000, variable costs per unit of $5, and a selling price per unit of $20. Determine the breakeven point in units and dollars, and explore the concept of target...
-
Whichdatabase is/are typically used in the database redesign process? give reason
-
Congress has the responsibility to oversee federal agencies. One of those agencies is the U.S. Department of Justice. Let us pretend that the leadership of the Federal Department of Justice has...
-
Problem 11: Materials, Labor and Factory Overhead Variances Julie Corporation uses a standard cost system and has the following standard variable costs.
-
The following financial information is provided for Some Company: Some Company Balance Sheet Beginning Balance Ending Balance Assets Cash $ 75,250 $ 83,500 Accounts receivable $ 25,125 $ 23,695...
-
What are items that need to be considered when planning the timeline for a change?
-
John has f0 dollars in his bank account at the beginning of year 1. Each year, he will earn some interest and withdraw some money. He asks you, his financial manager, to help him come up with a...
-
How has the globalization of firms affected the diversity of their employees? Why has increased diversity put an additional burden on accounting systems?
-
You are considering the following investment: The discount rate is 11% and the corporate tax rate is 34%. a. Calculate the project NPV using straight-line depreciation. b. What will be the company's...
-
A factory is considering the purchase of a new machine for one of its units. The machine costs $100,000. The machine will be depreciated on a straight line basis over its 10-year life to a salvage...
-
The ABD Company is considering buying a new machine for one of its factories. The machine cost is $100,000 and its expected life span is 8 years. The machine is expected to reduce the production cost...
Study smarter with the SolutionInn App