Question

In: Finance

We are evaluating a project that costs $908,000, has a four-year life, and has no salvage...

We are evaluating a project that costs $908,000, has a four-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 87,200 units per year. Price per unit is $34.35, variable cost per unit is $20.60, and fixed costs are $752,000 per year. The tax rate is 40 percent, and we require a return of 13 percent on this project.

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

  

Base-case operating cash flow $
NPV $

  

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.)

  

Sensitivity of NPV            $

  

If there is a 500-unit decrease in projected sales, how much would the NPV drop? (Input your answer as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

NPV drop            $

  

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.)

  

Sensitivity of OCF            $

  

If there is $1 decrease in estimated variable costs, how much would the increase in OCF be? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

Increase in OCF            $

Solutions

Expert Solution


Related Solutions

We are evaluating a project that costs $908,000, has a four-year life, and has no salvage...
We are evaluating a project that costs $908,000, has a four-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 87,200 units per year. Price per unit is $34.35, variable cost per unit is $20.60, and fixed costs are $752,000 per year. The tax rate is 40 percent, and we require a return of 13 percent on this project. Calculate the base-case operating cash flow and...
We are evaluating a project that costs $924,000, has a four-year life, and has no salvage...
We are evaluating a project that costs $924,000, has a four-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 87,600 units per year. Price per unit is $34.55, variable cost per unit is $20.80, and fixed costs are $756,000 per year. The tax rate is 35 percent, and we require a return of 13 percent on this project. Calculate the base-case operating cash flow and...
We are evaluating a project that costs $908,000, has a four-year life, and has no salvage...
We are evaluating a project that costs $908,000, has a four-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 87,200 units per year. Price per unit is $34.35, variable cost per unit is $20.60, and fixed costs are $752,000 per year. The tax rate is 30 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity,...
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
We are evaluating a project that costs $739,600, has aneight-year life, and has no salvage...
We are evaluating a project that costs $739,600, has an eight-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 $49, variable cost per unit is $34, and fixed costs are $735,000 per year. The tax rate is 23 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 $604,000, has an 8-year life, and has no salvage...
We are evaluating a project that costs $604,000, has an 8-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 55,000 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year. The tax rate is 21 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 $748,000, has a twelve-year life, and has no salvage...
We are evaluating a project that costs $748,000, has a twelve-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 113,000 units per year. Price per unit is $36, variable cost per unit is $23, and fixed costs are $760,716 per year. The tax rate is 37 percent, and we require a 12 percent return on this project. Requirement 1: Calculate the accounting break-even point.(Round your...
We are evaluating a project that costs $500,000, has an eight-year life, and has no salvage...
We are evaluating a project that costs $500,000, has an eight-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 50,000 units per year. Price per unit is $40, variable cost per unit is $25, and fixed costs are $600,000 per year. The tax rate is 22 percent, and we require a return of 12 percent on this project. Suppose the projections given for price, quantity,...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT