Question
In: Finance
We are evaluating a project that costs $832,000, has a life of 8 years, and has...
|
We are evaluating a project that costs $832,000, has a life of 8 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 40,000 units per year. Price per unit is $40, variable cost per unit is $15, and fixed costs are $700,000 per year. The tax rate is 23 percent and we require a return of 13 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.) |
| 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.) |
| c. | What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
We are evaluating a project that costs $832,000, has a life of 8 years, and has...
We are evaluating a project that costs $832,000, has a life of 8
years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 40,000 units per year. Price per unit is $40, variable
cost per unit is $17, and fixed costs are $700,000 per year. The
tax rate is 23 percent and we require a return of 13 percent on
this project. Suppose the projections given for...
We are evaluating a project that costs $832,000, has a life of 8 years, and has...
We are evaluating a project that costs $832,000, has a life of 8
years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 40,000 units per year. Price per unit is $40, variable
cost per unit is $17, and fixed costs are $700,000 per year. The
tax rate is 23 percent and we require a return of 13 percent on
this project. Suppose the projections given for...
We are evaluating a project that costs $832,000, has an eight-year life, and has no salvage...
We are evaluating a project that costs $832,000, has an
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is straight-line to zero over the life of the project. Sales are
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years, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 60,000 units per year. Price per unit is $40, variable
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