ZuoTi.Pro
Question

We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage...

We are evaluating a project that costs $800,000, 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 95,000 units per year. Price per unit is $37, variable cost per unit is $22, and the fixed costs are $880,000 per year. The tax rate is 35%, and we require a return of 15% on this project.

a. Calculate the accounting break-even point.

b. Calculate the base case cash flow and NPV. What is the sensitivity of NPV to change in the sales figure? What your answer tells you about a 500 unit decrease in projected sales.

c. What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a 1$ decrease in estimated variable costs.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASEw v e 1x : ENG 03:03 24-02-2020 24 3600 А B C D E F G H I J K L A 600 601 602 603 depreciation = 800000/8 = 100000.00 604 a A

12 e 59W v 1* 03:05 : ENG 24-02-202024 H624 - X V fix Formula Bar F G H 624 625 E Present value of all cash flows - investm

0 0
Add a comment
Know the answer?
Add Answer to:
We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • We are evaluating a project that costs $896,000, has eight year life, and has no salvage...

    We are evaluating a project that costs $896,000, has 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 100,000 units per year. Price per unit is $38, variable cost per unit is $25, and fixed costs are $900,000 per year. The tax rate is 35%, and we require a 15% return on this project. Calculate the accounting break-even point. What is the degree of...

  • We are evaluating a project that costs $800,000, has an eight-year life, and has no salvage...

    We are evaluating a project that costs $800,000, 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 60,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $800,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. a. Calculate the accounting break-even point. (Do...

  • We are evaluating a project that costs $2,040,000, has a 7-year life, and has no salvage...

    We are evaluating a project that costs $2,040,000, has a 7-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 89,700 units per year. Price per unit is $38.67, variable cost per unit is $23.80, and fixed costs are $851,000 per year. The tax rate is 22 percent, and we require a return of 10 percent on this project. a. Calculate the base-case operating cash flow...

  • 1. We are evaluating a project that costs $864,000, has an eight-year life, and has no...

    1. We are evaluating a project that costs $864,000, 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 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. a. Calculate the accounting break-even point....

  • We are evaluating a project that costs $1,140,000, has a ten-year life, and has no salvage...

    We are evaluating a project that costs $1,140,000, has a ten-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 54,000 units per year. Price per unit is $50, variable cost per unit is $20, and fixed costs are $741,000 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. is...

  • We are evaluating a project that costs $520,000, has a five-year life, and has no salvage...

    We are evaluating a project that costs $520,000, has a five-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 73,000 units per year. Price per unit is $50, variable cost per unit is $30, and fixed costs are $832,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. a. calculate the break even point. b-1....

  • We are evaluating a project that costs $500,000, has an eight-year life, and has no salvage...

    We are evaluating a project that costs $500,000, 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 50,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $600,000 per year. The tax rate is 35 percent, and we require a return of 12 percent on this project. b-2 What is the sensitivity of NPV...

  • We are evaluating a project that costs $1,120,000, has a ten-year life, and has no salvage...

    We are evaluating a project that costs $1,120,000, has a ten-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 64,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $620,000 per year. The tax rate is 35 percent, and we require a return of 12 percent on this project. 1.Calculate the accounting break-even point. 2. What...

  • We are evaluating a project that costs $1,180,000, has a five-year life, and has no salvage...

    We are evaluating a project that costs $1,180,000, has a five-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 88,100 units per year. Price per unit is $34.80, variable cost per unit is $21.05, and fixed costs are $761,000 per year. The tax rate is 40 percent, and we require a return of 10 percent on this project Calculate the base-case operating cash flow and...

  • We are evaluating a project that costs $848,000, has an eight-year life, and has no salvage...

    We are evaluating a project that costs $848,000, 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 62,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $636,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project. a. Calculate the accounting break-even point. (Do...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT