We are evaluating a project that costs $604,000, has an 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 55,000 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project. Calculate the accounting break-even point. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? What is the sensitivity of OCF to changes in the variable cost figure?
We are evaluating a project that costs $604,000, has an 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 55,000 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project. Calculate the accounting break-even point. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? What is the sensitivity of OCF to changes in the variable cost figure?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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We are evaluating a project that costs $604,000, has an 8-year life, and has no salvage value. Assume that
Calculate the accounting break-even point. | |
Calculate the base-case cash flow and |
|
What is the sensitivity of NPV to changes in the sales figure? | |
What is the sensitivity of OCF to changes in the variable cost figure? |
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