Suppose you are considering an investmentproject that requires $800.000, has a six-year life,and has a salvage value of $100,000. Sales volumeis projected to be 65,000 units per year. Price perunit is $63, variable cost per unit is $42, and fixedcosts are $532,000 per year. The depreciationmethod is a five-year SL and assume MARR 10%.(a) Determine the break-even sales volume. (b)Calculate the cash flows of the base case over sixyears and its NPW. (c) lf the sales price per unitincreases to $400, what is the required break-evenvolume? (d) Suppose the projections given forprice, sales volume, variable costs, and fixed costsare all accurate to within + 15%. What would bethe NPW figures of the best-case and worst-casescenarios?

The term depreciation refers to an accounting method used to allocate the cost of a tangible or…

projected to be 65,000 units per year. Price per hit is $63, variable cost per unit is $42, and fixed osts are $532,000 per year. The depreciation ethod is a five-year SL and assume MARR 10%. Determine the break-even sales volume. (b)

projected to be 65,000 units per year. Price per hit is $63, variable cost per unit is $42, and fixed osts are $532,000 per year. The depreciation ethod is a five-year SL and assume MARR 10%. Determine the break-even sales volume. (b)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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