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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.

a. Calculate the accounting break-even point.

b. Calculate the base-case cash flow and NPV

b-2 What is the sensitivity of NPV to changes in the sales figure?

c. What is the sensitivity of OCF to changes in the variable cost figure?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92067551

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