We are evaluating a project that costs $845,000, has an eight year life, and has no salvage valhe. 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 $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(PLEASE SHOW FORMULAS)

(Use cells A6 to C17 from the given information to comn 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