$"$We are evaluating a project that$$costs $$845,000,$ has an eight$-$year life, and has no salvage value. Assume that depreciation$$is straight$-$line to zero over the life of the project. Sales are projected at $51,000$units per year. Price per unit is $$53,$ variable cost per unit is $$27,$ and fixed costs are$$$$950,000$ per year. The tax rate is $22$ percent, and we require a return of $10$ percent$$on this project.

a$.$ Calculate the accounting break$-$even point. What is the degree of operating leverage$$at the accounting break$-$even point?

b$.$ Calculate the base$-$case cash flow and NPV$.$ What is the sensitivity of NPV to$$changes in the quantity sold? Explain what your answer tells you about a $500-$unit$$decrease in the quantity sold.

c$.$ What is the sensitivity of OCF to changes in the variable cost figure? Explain$$what your answer tells you about a $$1$ decrease in estimated variable costs."Input area:

$($Use cells A$6$ to $C17$ from the given information to complete this question. You must use the built$-$in Excel function to

answer this question. The OCF must be calculated using the depreciation tax shield approach.$)$

Output area:

a$.$ Depreciation per year

Accounting break$-$even

DOL

b$.$ Base OCF

Base NPV

OCF at new quantity

NPV at new quantity

DNPV$/$DQ

Change in NPV for given quantity change

c$.$ OCF

DOCF$/$DVC

Change in NPV for given VC change