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Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that co

ID: 2695183 • Letter: S

Question

Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $924,000, 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 75,000 units per year. Price per unit is $46, variable cost per unit is $31, and fixed costs are $825,000 per year. The tax rate is 35 percent, and we require a 15 percent return on this project. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point? (Round your answer to 3 decimal places. (e.g., 32.161)) Calculate the base-case cash flow and NPV. (Round your NPV answers 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 final answer to 3 decimal places. (e.g., 32.161)) What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)

Explanation / Answer

do you have a calculator

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