We are evaluating a project that costs $648,000, has an eight-year life, and will be worth...

We are evaluating a project that costs $648,000, has an eight-year life, and will be worth nothing at the end. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 65,000 units per year. Price per unit is $53, variable cost per unit is $37, and fixed costs are $655,000 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.

b. Calculate the base-case NPV. What would be the NPV if sales were to decrease by 500 units?

c. What would be the NPV if the variable cost per unit were to decrease by $1?

Expert Solution

jeff jeffy answered 1 year ago

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We are evaluating a project that costs $648,000, has an eight-year life, and will be worth...

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