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## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

We are evaluating a project that costs \$924,000, has an eight-year life, has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is \$46, variable cost per unit is \$31, and fixed costs are \$825,000 per year. The tax rate is 35% and we require a 15% return on this project.

1) find out the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?

2) find out the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? describe what your answer tells you about a 500-unit decrease in projected sales.

3) What is the sensitivity of OCF to changes in the variable cost figure? describe what your answer tells you about a \$1 decrease in estimated variable costs.

4) Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate within +/- 10%. find out the best case and worst case NPV figures.

Please show all work in excel and formulas.

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M924114
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