We are evaluating a project that costs $1,120,000, has a ten-year life, and has no...
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Accounting
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 12 percent return on this project.
a-1
Calculate the accounting break-even point.
Break-even point
units
a-2
What is the degree of operating leverage at the accountin g break-even point? (Round your answer to 3 decimal places. (e.g., 32.161))
DOL
b-1
Calculate the base-case cash flow and NPV. (Round your NPV answer to 2 decimal places. (e.g., 32.16))
Cash flow
$
NPV
$
b-2
What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places. (e.g., 32.161))
?NPV/?Q
$
c.
What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)
?OCF/?VC
$
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