We are evaluating a project that costs $924,000, has an eight-year life, and has

Question

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))

Calculate the accounting break-even point.

Explanation / Answer

http://www.chegg.com/homework-help/sensitivity-analysis-break-lo1-3-evaluating-project-costs-92-chapter-11-problem-5qp-solution-9780078034633-exc

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