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 and NPV.
b. What is the sensitivity of NPV to changes in the sales figure?
c. If there is a 400-unit decrease in projected sales, how much would the NPV change?
d. What is the sensitivity of OCF to changes in the variable cost figure?
e. If there is a $1 decrease in estimated variable costs, how much would the OCF change?
1.
=(89700*(38.67-23.8)-851000-2040000/7)*(1-22%)+2040000/7=440728.705714286
2.
=-2040000+((89700*(38.67-23.8)-851000-2040000/7)*(1-22%)+2040000/7)/10%*(1-1/1.1^7)=105651.92439688
3.
=(38.67-23.8)*(1-22%)/10%*(1-1/1.1^7)=56.4668424988933
4.
=-400*(38.67-23.8)*(1-22%)/10%*(1-1/1.1^7)=-22586.7369995573
5.
=89700*(-1)*(1-22%)=-69966.00
6.
=-1*89700*(-1)*(1-22%)=69966.00
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 12 percent on this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $1.980.000, 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 89.100 units per year. Price per unit is $38.55. variable cost per unit is $23.70, and fixed costs are $845.000 per year. The tax rate is 25 percent, and we require a return of 10 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $2,070,000, 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 93,400 units per year. Price per unit is $38.73, variable cost per unit is $23.85, and fixed costs are $854,000 per year. The tax rate is 23 percent, and we require a return of 10 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $2,010,000, 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 89,400 units per year. Price per unit is $38.61, variable cost per unit is $23.75, and fixed costs are $848,000 per year. The tax rate is 21 percent, and we require a return of 10 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $2,160,000, has a 8-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 90,900 units per year. Price per unit is $38.91, variable cost per unit is $24.00, and fixed costs are $863,000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $1,800,000, has a 6-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 87,300 units per year. Price per unit is $38.19, variable cost per unit is $23.40, and fixed costs are $827,000 per year. The tax rate is 24 percent, and we require a return of 9 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $2,130,000, has a 8-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 90,600 units per year. Price per unit is $38.85, variable cost per unit is $23.95, and fixed costs are $860,000 per year. The tax rate is 25 percent, and we require a return of 11 percent on this project. 0:45 a. Calculate the base-case operating cash...
We are evaluating a project that costs $2,280,000, has a 8-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 98,300 units per year. Price per unit is $39.15, variable cost per unit is $24.20, and fixed costs are $875,000 per year. The tax rate is 25 percent, and we require a return of 11 percent on this project. a. Calculate the base-case operating cash flow...
We are evaluating a project that costs $1,710,000, has a 6-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 86,400 units per year. Price per unit is $38.01, variable cost per unit is $23.25, and fixed costs are $818,000 per year. The tax rate is 21 percent, and we require a return of 9 percent on this project. points Skipped eBook a. Calculate the base-case...
We are evaluating a project that costs $1,920,000, has a 6-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 94,500 units per year. Price per unit is $38.43, variable cost per unit is $23.60, and fixed costs are $839,000 per year. The tax rate is 23 percent, and we require a return of 10 percent on this project. a. Calculate the base-case operating cash flow...