Question
In: Finance
We are evaluating a project that costs $1,080,000, has a ten-year life, and has no salvage...
| We are evaluating a project that costs $1,080,000, has a ten-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 52,000 units per year. Price per unit is $48, variable cost per unit is $27, and fixed costs are $756,000 per year. The tax rate is 25 percent, and we require a return of 15 percent on this project. |
| a. | Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| 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.) |
| 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.) |
| b-3. | Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| c. | What is the sensitivity of OCF to changes in the variable cost figure |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
We are evaluating a project that costs $1,080,000, has a ten-year life, and has no salvage...
We are evaluating a project that costs $1,080,000, has a
ten-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 52,000 units per year. Price per unit is $50, variable
cost per unit is $30, and fixed costs are $756,000 per year. The
tax rate is 35 percent, and we require a return of 15 percent on
this project.
a. Calculate the accounting break-even point.
(Do...
We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage...
We are evaluating a project that costs $1,160,000, has a
ten-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 44,000 units per year. Price per unit is $45, variable
cost per unit is $22, and fixed costs are $645,000 per year. The
tax rate is 24 percent, and we require a return of 20 percent on
this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage...
We are evaluating a project that costs $1,160,000, has a
ten-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 44,000 units per year. Price per unit is $45, variable
cost per unit is $20, and fixed costs are $645,000 per year. The
tax rate is 35 percent, and we require a return of 20 percent on
this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage...
We are evaluating a project that costs $1,160,000, has a
ten-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 44,000 units per year. Price per unit is $45, variable
cost per unit is $20, and fixed costs are $645,000 per year. The
tax rate is 35 percent, and we require a return of 20 percent on
this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $1,180,000, has a ten-year life, and has no salvage...
We are evaluating a project that costs $1,180,000, has a
ten-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 66,000 units per year. Price per unit is $36, variable
cost per unit is $25, and fixed costs are $750,000 per year. The
tax rate is 35 percent, and we require a return of 15 percent on
this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $1,080,000, has a life of 10 years, and has...
We are evaluating a project that costs $1,080,000, has a life of
10 years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 52,000 units per year. Price per unit is $50, variable
cost per unit is $30, and fixed costs are $730,000 per year. The
tax rate is 25 percent and we require a return of 15 percent on
this project. Suppose the projections given for...
We are evaluating a project that costs $1,080,000, has a life of 10 years, and has...
We are evaluating a project that costs $1,080,000, has a life of
10 years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 52,000 units per year. Price per unit is $50, variable
cost per unit is $30, and fixed costs are $730,000 per year. The
tax rate is 25 percent and we require a return of 15 percent on
this project. Suppose the projections given for...
We are evaluating a project that costs $1,920,000, has a 6 year life, and no salvage...
We are evaluating a project that costs $1,920,000, has a 6 year
life, and no salvage value. Assume that depreciation is
staright-line to zero over the life of the project. Sales are
projected at 94,000 units per year. Price per unit is $38.43,
variable cost per unit is $23.60 and fixed costs are $839,000 per
year. The tax rate is 23 percent and we require a return of 12
percent on this project.
Suppose the projections given for the price,...
We are evaluating a project that costs $972,000, has a 4 year life, and no salvage...
We are evaluating a project that costs $972,000, has a 4 year
life, and no salvage value. Assume that depreciation is
staright-line to zero over the life of the project. Sales are
projected at 88,000 units per year. Price per unit is $35.15,
variable cost per unit is $21.40 and fixed costs are $768,000 per
year. The tax rate is 35 percent and we require a return of 13
percent on this project.
A) Calculate the best case operating cash...
we are evaluating a project that costs $690,000, has a five year life, and no salvage...
we are evaluating a project that costs $690,000, has a five year
life, and no salvage value. Assume that straightline to zero over
the life of the project. sales are projected at 71,000 units per
year. price per unit is $75, variable cost per unit is $38 and
fixed costs are $790,000 per year. The tax rate is 35%, and we
require a return of 15% on this project Calculate the best case and
wore case npv figures
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