ung a project that costs $845,000, has an eight-year life, a e value. Assume that depreciation is straight-line to zero over the - Sales are projected at 51,000 units per year. Price per unit is $53 t is $27, and fixed costs are $950,000 per year. The tax rate is 22 a return of 10 percent on this project. alculate the accounting break-even point. (Do not round intermedi Iculations and round your answer to the nearest whole numhor
ung a project that costs $845,000, has an eight-year life, a e value. Assume that depreciation is straight-line to zero over the - Sales are projected at 51,000 units per year. Price per unit is $53 t is $27, and fixed costs are $950,000 per year. The tax rate is 22 a return of 10 percent on this project. alculate the accounting break-even point. (Do not round intermedi Iculations and round your answer to the nearest whole numhor
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![We are evaluating a project that costs $845,000, 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 51,000 units per year. Price per unit is $53, variable cost
per unit is $27, and fixed costs are $950,000 per year. The tax rate is 22 percent, and we
require a return of 10 percent on this project.
a-1. Calculate the accounting break-even point. (Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.)
a-2. What is the degree of operating leverage at the accounting break-even point? (Do
not round intermediate calculations and round your answer to 3 decimal places,
e.g., 32.161.)
b-1. Calculate the base-case cash flow and NPV. (Do not round intermediate
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-2. What is the sensitivity of NPV to changes in the quantity sold? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
What is the sensitivity of OCF to changes in the variable cost figure? (A negative
answer should be indicated by a minus sign. Do not round intermediate
calculations.)
C.
a-1. Break-even point
units
a-2. DOL
b-1. Cash flow
b-1. NPV
b-2. ANPVIAQ
c. AOCF/AVC](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae8a11bd-ad7f-47d8-a5c8-89ea0daeecfe%2F1de30957-e717-48be-82f6-117de36118c2%2Fbfp5tep_processed.jpeg&w=3840&q=75)
Transcribed Image Text:We are evaluating a project that costs $845,000, 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 51,000 units per year. Price per unit is $53, variable cost
per unit is $27, and fixed costs are $950,000 per year. The tax rate is 22 percent, and we
require a return of 10 percent on this project.
a-1. Calculate the accounting break-even point. (Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.)
a-2. What is the degree of operating leverage at the accounting break-even point? (Do
not round intermediate calculations and round your answer to 3 decimal places,
e.g., 32.161.)
b-1. Calculate the base-case cash flow and NPV. (Do not round intermediate
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-2. What is the sensitivity of NPV to changes in the quantity sold? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
What is the sensitivity of OCF to changes in the variable cost figure? (A negative
answer should be indicated by a minus sign. Do not round intermediate
calculations.)
C.
a-1. Break-even point
units
a-2. DOL
b-1. Cash flow
b-1. NPV
b-2. ANPVIAQ
c. AOCF/AVC
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