Question: We are evaluating a project that costs $768,000, has a shelf life of 6 years, and has no salvage value. Assume that depreciation is straight-line

We are evaluating a project that costs $768,000, has a shelf life of 6 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 104,000 units per year. Price per unit is $36, variable cost per unit is $29, and fixed costs are $777,984 per year. The tax rate is 22 percent, and we require a return of 12 percent on this project.

2c.) What is the sensitivity of the NPV to changes in quantity sold?

2d.) What your answer tells you about a 500-unit decrease in the quantity sold?

3a.) What is the sensitivity of OCF to changes in the variable cost figure?

3b.) How much will OCF change if variable variable costs decrease by $1?

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