Question: with explaination and clear step by step please 1. A 10-year steel pipe-producing project requires $96 million in upfront investment (all in depreciable assets), $38
1. A 10-year steel pipe-producing project requires $96 million in upfront investment (all in depreciable assets), $38 million of which is borrowed capital at an interest rate of 6.80% per year. The expected pipe sales are 2,560,000 pipes per year. The expected price per pipe is $250 and the variable cost is $206 per unit. The fixed costs excluding depreciation are expected to be $35 million per year for ten years. The upfront investment will be depreciated on a straight-line basis for the 10-year life of the project to $12 million book value. The expected salvage value of the assets is $16 million. The tax rate is 25% and the RRR applicable to the project is 15%. a. Calculate the accounting and cash break-even points. b. Calculate the DOL, DFL, and DCL (Do not use the equations and do your own change in sales). c. Calculate the NPV breakeven annual free cash flow for the project. d. Calculate the NPV break-even point (Q2)
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