We are evaluating a project that costs $1,422,000, has a six-year life, and has

Question

We are evaluating a project that costs $1,422,000, 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 88,200 units per year. Price per unit is $34.85, variable cost per unit is $21.10, and fixed costs are $762,000 per year. The tax rate is 35 percent, and we require a return of 11 percent on this project.

Base Cash Flow = 375937.50

NPV = 168417.824

given the above information find the:

Sensitivity of NPV

NPV drop

Sensitivity of OCF

Increase in OCF

Explanation / Answer

We are evaluating a project that costs $1,422,000, has a six-year life, and has

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