We are evaluating a project that costs $571,800, has a six-year life, and has no salvage...

We are evaluating a project that costs $571,800, has a six-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 80,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $685,000 per year. The tax rate is 23 percent, and we require a return of 11 percent on this project. a-1. Calculate the accounting break-even point. a-2.What is the degree of operating leverage at the accounting break-even point? b-1.Calculate the base-case cash flow and NPV. b-2.What is the sensitivity of NPV to changes in the quantity sold? c. What is the sensitivity of OCF to changes in the variable cost figure?

Expert Solution

The following are the data inputs in spreadsheet:

The following are the obtained results in spreadsheet:

jeff jeffy answered 2 years ago

We are evaluating a project that costs $1,374,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $1,374,000, has a six-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 87,400 units per year. Price per unit is $34.45, variable cost per unit is $20.70, and fixed costs are $754,000 per year. The tax rate is 30 percent, and we require a return of 11 percent on this project. Calculate the base-case operating cash flow and...

We are evaluating a project that costs $768,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $768,000, has a six-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 57,000 units per year. Price per unit is $60, variable cost per unit is $35, and fixed costs are $770,000 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 $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-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 67,000 units per year. Price per unit is $60, variable cost per unit is $42, and fixed costs are $665,000 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 $768,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $768,000, has a six-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 57,000 units per year. Price per unit is $60, variable cost per unit is $40, and fixed costs are $768,000 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...

We are evaluating a project that costs $583,800, has a six-year life, and has no salvage...

We are evaluating a project that costs $583,800, has a six-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 90,000 units per year. Price per unit is $41, variable cost per unit is $27, and fixed costs are $695,000 per year. The tax rate is 25 percent, and we require a return of 9 percent on this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $560,400, has a six-year life, and has no salvage...

We are evaluating a project that costs $560,400, has a six-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 80,000 units per year. Price per unit is $38, variable cost per unit is $24, and fixed costs are $680,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $560,400, has a six-year life, and has no salvage...

We are evaluating a project that costs $560,400, has a six-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 80,000 units per year. Price per unit is $38, variable cost per unit is $24, and fixed costs are $680,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. Suppose the projections given for price, quantity,...

We are evaluating a project that costs $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-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 67,000 units per year. Price per unit is $60, variable cost per unit is $25, and fixed costs are $693,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project. a. Calculate the accounting break-even point. (Do...

We are evaluating a project that costs $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-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 67,000 units per year. Price per unit is $60, variable cost per unit is $25, and fixed costs are $693,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project. a. Calculate the accounting break-even point. (Do...

We are evaluating a project that costs $583,800, has a six-year life, and has no salvage...

We are evaluating a project that costs $583,800, has a six-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 90,000 units per year. Price per unit is $41, variable cost per unit is $27, and fixed costs are $695,000 per year. The tax rate is 25 percent, and we require a return of 9 percent on this project. Suppose the projections given for price, quantity,...

Question

We are evaluating a project that costs $571,800, has a six-year life, and has no salvage...

Solutions

Expert Solution

Related Solutions

We are evaluating a project that costs $1,374,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $768,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $768,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $583,800, has a six-year life, and has no salvage...

We are evaluating a project that costs $560,400, has a six-year life, and has no salvage...

We are evaluating a project that costs $560,400, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $756,000, has a six-year life, and has no salvage...

We are evaluating a project that costs $583,800, has a six-year life, and has no salvage...