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Problem:

We are evaluating a project that costs $1.68 million, has a 5-year life, and has no salvage value. Assume depreciation is straight-line to zero over the life of the project. Sales are projected at 82,000 units per year. Price per unit is $43.29, variable cost per unit is $22.18, and fixed costs are $623,000 per year. The tax rate is 34 percent, and we require a 10 percent return on this project.

Requirement:

Question: What is the sensitivity of NPV to a 100 unit change in the sales figure?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172878

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