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 20 percent return on this project.
I NEED THE FOLLOWING:
-ACCOUNTING BREAK EVEN POINT
-the degree of operating leverage at 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?
| 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 20 percent return on this project. I NEED THE FOLLOWING: -ACCOUNTING BREAK EVEN POINT -the degree of operating leverage at the accounting break-even point
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Related questions
| We are evaluating a project that costs $832,000, 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 40,000 units per year. Price per unit is $40, variable cost per unit is $15, and fixed costs are $700,000 per year. The tax rate is 35 percent, and we require a return of 18 percent on this project. 1) Calculate the accounting break-even point. 2) What is the degree of operating leverage at the accounting break-even point? 3) Calculate the base-case cash flow and NPV. 4) What is the sensitivity of NPV to changes in the sales figure? (Delta NPV/ Delta Q) 5) What is the sensitivity of OCF to changes in the variable cost figure? (Delta OCF/Delta VC) |
