We are evaluating a project that costs $877,000, has a life of 12 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 101,000 units per year. Price per unit is $40, variable cost per unit is $27, and fixed costs are $885,770 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. 1a. Calculate the accounting break-even point. Break-even point 68,136 units 74,758 units 72,658 units 70,136 units 1b. What is the degree of operating leverage at the accounting break-even point? DOL 13.120 1.083 13.220 13.020 2a. Calculate the base-case cash flow. Cash flow $349,318 $ 77,913 $369,318 $329,318 2b. Calculate the NPV. NPV $1,503,143 $1,513,143 $1,493,143 $ 77,913 2c. What is the sensitivity of NPV to changes in the quantity sold? ANPV/AQ $ 69.091 $ 14.748 $ 69.191 $ 68.991 2d. What your answer tells you about a 500-unit decrease in the quantity sold? NPV drop $-34,545.42 $-77,913.00 $-35,545.42 $-33,545.42 3a. What is the sensitivity of OCF to changes in the variable cost figure? AOCF/AVC $ -78,780 $ -74,758 $ -73,758 $ -79,780 3b. How much will OCF change if variable costs decrease by $1? OCF $ 78,780 $ 74,758 $ 79,780 $ 77,780 We are evaluating a project that costs $877,000, has a life of 12 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 101,000 units per year. Price per unit is $40, variable cost per unit is $27, and fixed costs are $885,770 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. 1a. Calculate the accounting break-even point. Break-even point 68,136 units 74,758 units 72,658 units 70,136 units 1b. What is the degree of operating leverage at the accounting break-even point? DOL 13.120 1.083 13.220 13.020 2a. Calculate the base-case cash flow. Cash flow $349,318 $ 77,913 $369,318 $329,318 2b. Calculate the NPV. NPV $1,503,143 $1,513,143 $1,493,143 $ 77,913 2c. What is the sensitivity of NPV to changes in the quantity sold? ANPV/AQ $ 69.091 $ 14.748 $ 69.191 $ 68.991 2d. What your answer tells you about a 500-unit decrease in the quantity sold? NPV drop $-34,545.42 $-77,913.00 $-35,545.42 $-33,545.42 3a. What is the sensitivity of OCF to changes in the variable cost figure? AOCF/AVC $ -78,780 $ -74,758 $ -73,758 $ -79,780 3b. How much will OCF change if variable costs decrease by $1? OCF $ 78,780 $ 74,758 $ 79,780 $ 77,780