Hello tutor provide answer step by step calculation for the general accounting Modern Artifacts can produce keepsakes that will be sold for $90each. Nondepreciating fixed costs are $1,300 per year, andvariable costs are $50 per unit. The initial investment of $3,900will be depreciated straight-line over its useful life of 5 years to afinal value of zero, and the discount rate is 12%.a. What is the degree of operating leverage of Modern Artifactswhen sales are $4,950?b. What is the degree of operating leverage when sales are$9,630?c. Why is operating leverage different at these two levels ofsales?

Step 1:- Define Degree of Operating LeverageThe degree of operating leverage (DOL) is calculated as…

Answered: Modern Artifacts can produce keepsakes…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Modern Artifacts can produce keepsakes that will be sold for $70 each. Non-depreciated fixed costs are $1,050 per year and variable costs are $58 per unit. a. If the project requires an initial investment of $2,940 and is expected to last for 8 years and the firm pays no taxes, what are the accounting and NPV break-even levels of sales? The initial investment will be depreciated straight-line over 8 years to a final value of zero, and the discount rate is 9%. (Round your answers to the nearest whole dollar.) Accounting break-even sales level NPV break-even sales level $ b. How do your answers change if the firm's tax rate is 40%? (Round your answers to the nearest whole dollar.) Accounting break-even sales level NPV break-even sales level $
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What is the new degree of opereting leverage?
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Provide answer to financial question below
Suppose you are considering an investment project that requires $800.000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected 10 be 65,000 units per year. Price per un it is $63, variable cos! per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. 1l1e tax rate is 35% and you ex pect a 20% relurn on this investment. a-Determine the break-even sales volume. b-Calculate the cash flows of the base case over six years and its NPW. c-lf the sales price per unit increases to $400, what is the required break-even volume? d-Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurate to within ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?

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