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e the accounting id your answer ne degree of op d Intermedlate 61.) e the base-case ons. Round yOL pur NPV answe ne sensitivlty of

e the accounting id your answer ne degree of op d Intermedlate 61.) e the base-case ons. Round yOL pur NPV answe ne sensitivlty of

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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We are evaluating a project that costs $788,400, has a nine-year life, and has no salvage value. Assume that depreclation Is stralght-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $52, varlable cost per unit Is $36, and fixed costs are $750,000 per year. The tax rate Is 21 percent, and we require a return of 12 percent on this project. a-1.Calculate the accounting break-even polnt. (Do not round Intermedlate calculatlons and round your answer to the nearest whole number, e.g., 32.) a- What Is the degree of operating leverage at the accounting break-even polnt? (Do 2. not round Intermedlate calculations and round your answer to 3 decimal places, e.g., 32161.) b- Calculate the base-case cash flow and NPV. (Do not round Intermedlate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What Is the sensitivity of NPV to changes In the quantity sold? (Do not round 2. Intermedlate calculations and round your ans c. What Is the sensitivity of OCF to changes In the varlable cost figure? (A negatlve answer should be Indicated by a mlnus sign. Do not round Intermedlate calculations and round your answer to the nearest whole number, e.g., 32.) to 2 decimal places, e.g., 32.16.) a-1. Break-even point 52,350 units a-2. DOL 9.562 b-1. Cash flow 373.896 NPV b-2. ANPVIAQ C. AOCF/AVC
Transcribed Image Text:We are evaluating a project that costs $788,400, has a nine-year life, and has no salvage value. Assume that depreclation Is stralght-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $52, varlable cost per unit Is $36, and fixed costs are $750,000 per year. The tax rate Is 21 percent, and we require a return of 12 percent on this project. a-1.Calculate the accounting break-even polnt. (Do not round Intermedlate calculatlons and round your answer to the nearest whole number, e.g., 32.) a- What Is the degree of operating leverage at the accounting break-even polnt? (Do 2. not round Intermedlate calculations and round your answer to 3 decimal places, e.g., 32161.) b- Calculate the base-case cash flow and NPV. (Do not round Intermedlate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What Is the sensitivity of NPV to changes In the quantity sold? (Do not round 2. Intermedlate calculations and round your ans c. What Is the sensitivity of OCF to changes In the varlable cost figure? (A negatlve answer should be Indicated by a mlnus sign. Do not round Intermedlate calculations and round your answer to the nearest whole number, e.g., 32.) to 2 decimal places, e.g., 32.16.) a-1. Break-even point 52,350 units a-2. DOL 9.562 b-1. Cash flow 373.896 NPV b-2. ANPVIAQ C. AOCF/AVC
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