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We are evaluating a project that costs $650,000, has a five-year life, and has no salvage...

We are evaluating a project that costs $650,000, has a five-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 47,000 units per year. Price per unit is $56, variable cost per unit is $26, and fixed costs are $860,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project.

   

a.

Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

  Break-even point units

     

b-1

Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places, e.g., 32.16.)

  

  Cash flow $   
  NPV $   

  

b-2

What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

  

  ΔNPV/ΔQ $   

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jeff jeffy answered 1 month ago
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