We are evaluating a project that costs $724,000, has a useful life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. The price per unit is $39, the variable cost per unit is $23, and the fixed costs are $850,000 per year. The tax rate is 35 percent and we require a 15 percent return on this project.

Requirement 1:

Calculate the accounting break-even point. (Round your answer to the nearest whole number.)

Breakeven

units

Requirement 2:
(a)	Calculate the cash flow and NPV for the base case. (Do not include dollar signs ($). Round your answers to 2 decimal places. (eg, 32.16))

Base Case Cash Flow	ps
VAN	ps

(b)	What is the sensitivity of the NPV to changes in the sales figure? (Do not include the dollar sign ($). Round your answer to 3 decimal places. (eg, 32,161))

NPV sensitivity

ps

(C)	Calculate the change in NPV if there is a 500 unit decrease in projected sales . (Do not include the dollar sign ($). Negative amount should be indicated with a minus sign. Round your answer to 2 decimal places. (eg, 32.16))

change in NPV

ps

Requirement 3:

(a)	How sensitive is OCF to changes in the variable cost figure? (Do not include the dollar sign ($). The negative amount must be indicated with the minus sign . )

OCF Sensitivity

ps

(b)	Calculate the change in OCF if there is a $1 decrease in estimated variable costs . (Do not include the dollar sign ($).)

Change in OCF

ps