We are evaluating a project that costs $845,000, has an eight-year life, and has nosalvage value. Assume that depreciation is straight-line to zero over the life of theproject. Sales are projected at 51,000 units per year. Price per unit is $53, variable costper unit is $27, and fixed costs are $950,000 per year. The tax rate is 22 percent, and werequire a return of 10 percent on this project.a-1. Calculate the accounting break-even point. (Do not round intermediatecalculations 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? (Donot 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 intermediatecalculations. 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 roundintermediate 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 negativeanswer should be indicated by a minus sign. Do not round intermediatecalculations.)C.a-1. Break-even pointunitsa-2. DOLb-1. Cash flowb-1. NPVb-2. ANPVIAQc. AOCF/AVC

As per rules one three subparts are answerable. Please post the remaining question as the seperate…

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Hughes Corporation is considering a project that would require an investment of $343,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows (Ignore income taxes.): Sales Variable expenses Contribution margin Fixed expenses: Salaries Rents Depreciation Total fixed expenses Net operating income $ 227,000 52,000 175,000 O 3.0 years O 5.1 years O 3.2 years O 4.8 years 27,000 41,000 40,000 108,000 $ 67,000 The scrap value of the project's assets at the end of the project would be $23,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:
2. A project costs $20,000, will be depreciated straight-line to zero over its 3 year life, and will required a net working capital investment of %5,000 up-front. The project generates OCF of $13,000. The fixed assets will be sold for $2,000 at the end of the project. If the firm has a tax rate of 34% and a required return of 12%, what is the project's NPV?
Bennett Company has a potential new project that is expected to generate annual revenues of $263,000, with variable costs of $144, 400, and fixed costs of $61,600. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $25,000. The annual depreciation is $25,400 and the tax rate is 35 percent. What is the annual operating cash flow? Multiple Choice $127,490 $82,400 $180,212 $45,940 $40,890
16. A 6-year project is expected to generate annual sales of 8,900 units at a price of $76 per unit and a variable cost of $47 per unit. The equipment necessary for the project will cost $317,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $190,000 per year and the tax rate is 25 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? $4,609 $6,007 $4,142 $5,075 $6,675
You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,700 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 9%. Ignore inflation. A. Calculate project NPV for each company. B. What is the IRR of the after-tax cash flows for each company?
practice
Given the following information, what is the financial break-even point? Initial investment = $250,000; variable cost = $95; fixed cost = $58,000; price = $130; life = 6 years; required return = 12%; SL depreciation; before-tax salvage value of assets = $28,000; initial net working capital investment = $35,000, and tax rate is 21%. Do It correctly I'll rate
4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Annual cost method Solve and show the solution.
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,300 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation.a. Calculate project NPV for each company. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) b. What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal places.)
Checking work. Find All Blank
ces We are evaluating a project that costs $2,160,000, has a 8-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 90,900 units per year. Price per unit is $38.91, variable cost per unit is $24.00, and fixed costs are $863,000 per year. The tax rate is 21 percent and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Best-case NPV Worst-case NPV