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Business, 23.04.2020 20:22 12375819

We are evaluating a project that costs $848,000, has an eight-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 62,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $625,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project.

Calculate the accounting break-even point.
Calculate the base-case cash flow and NPV.
What is the sensitivity of NPV to changes in the sales figure?
What is the sensitivity of OCF to changes in the variable cost figure?

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