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

Question

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 $665,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project. Calculate the accounting break-even point. (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) What is the degree of operating leverage at the accounting break-even point? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.)

Explanation / Answer

ask other parts seperately

a-1) Break even point Particulars Amount Sales price (A) 60 Variable price (B) 25 Contribution per unit ( C) = (A-B) 35 Contribution Margin ratio (D) = ( C / A) 0.583333 Fixed Cost ( E) 665000 Breakeven in units ( E / D) 19000 Units

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