Question

We are evaluating a project that costs S747,000, 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 86,000 units per year. Price per unit is $42, variable cost per unit is $29, and fixed costs are $755,964 per year. The tax rate is 32 percent, and we require a 12 percent return on this project. Requirement 1: Calculate the accounting break-even point (Round your answer to the nearest whole number. (e.g., 32)) Break-even point units Requirement 2 (a) Calculate the base-case cash fiow and NPV.(Do not include the dollar signs (S). Round your answers to 2 decimal places. (e.g., 32.16)) Base-case cash flow NPV (b) What is the sensitivity of NPV to changes in the sales figure? (Do not include the dollar sign (S). Round your answer to 3 decimal places. (e.g., 32.161) Sensitivity of NPV (c) Calculate the change in NPV If there is a 500-unit decrease in projected sales. (Do not include the dollar sign (S). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16)) Change in NPV Requirement 3: (a) What is the sensitivity of OCF to changes in the variable cost figure? (Do not include the dollar sign (S). Negative amount should be indicated by a minus sign. Round your answer to the nearest whole number. (e.g., 32) Sensitivity of OCF (b) Calculate the change in OCF if there is a $1 decrease in estimated variable costs. (Do not include the dollar sign (S). Round your answer to the nearest whole number. (e.g., 32)) Change in OCF