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. What is the degree of operating leverage at the accounting break-even point? b. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the quantity sold? Explain what your answer tells you about a 500-unit decrease in the quantity sold. 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
. 2. In the previous problem, suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures.
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1. We are evaluating a project that costs $864,000, has an eight-year life, and has no...
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 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...
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We are evaluating a project that costs $729,600. 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 90.000 units per year. Price per unit is $47, variable cost per unit is $34, and fixed costs are $725.000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. G-1. Calculate the accounting break-even point. (Do...
We are evaluating a project that costs $889,000, has an 10-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 105,000 units per year. Price per unit is $38, variable cost per unit is $26, and fixed costs are $891,667 per year. The tax rate is 38 percent, and we require a 17 percent return on this project. Requirement 1: Break-Even (a) Calculate the accounting...
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...
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