Finance

We are evaluating a project that costs $832,000, 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 40,000 units per year. Price per unit is $40, variable cost per unit is $15, and fixed costs are $700,000 per year. The tax rate is 35 percent, and we require a return of 18 percent on this project.

a. Calculate the accounting break-even point. (Do not round intermediate calculations and round your final answer to nearest whole number (e.g., 32).)

Don't use plagiarized sources. Get Your Custom Essay on
Finance
Just from $13/Page
Order Essay

Break-even point  units

b-1 Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answer to 2 decimal places (e.g., 32.16).)

Cash flow   $

NPV $

________________________________________

b-2 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).)

ΔNPV/ΔQ $

b-3 Calculate the change in NPV if sales were to drop by 500 units. (Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places (e.g., 32.16).)

NPV would by $

c. 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 and round your final answer to nearest whole number (e.g., 32).)

ΔOCF/ΔVC $

Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.