We are evaluating a project that costs $822,600, has a nine-year life, and has no salvage value. Assume that depreclation Is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $53, varlable cost per unit is $37, and fixed costs are $755,000 per year. The tax rate is 22 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even polnt. (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even polnt? (Do 2. not round Intermedlate 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 Intermedlate 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.) quantitysold? (Do not round
We are evaluating a project that costs $822,600, has a nine-year life, and has no salvage value. Assume that depreclation Is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $53, varlable cost per unit is $37, and fixed costs are $755,000 per year. The tax rate is 22 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even polnt. (Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even polnt? (Do 2. not round Intermedlate 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 Intermedlate 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.) quantitysold? (Do not round
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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We are evaluating a project that costs $822,600, has a nine-year life, and has no salvage
value. Assume that depreclation Is stralght-line to zero over the life of the project. Sales
are projected at 75,000 units per year. Price per unit Is $53, varlable cost per unit Is $37,
and fixed costs are $755,000 per year. The tax rate is 22 percent, and we require a
return of 9 percent on this project.
a-1.Calculate the accounting break-even polnt. (Do not round Intermedlate calculations
and round your answer to the nearest whole number, e.g., 32.)
a- What Is the degree of operating leverage at the accounting break-even polnt? (Do
2. not round Intermedlate 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 Intermedlate
calculatlons. 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- What Is the sensitivity of NPV to changes In the quantity sold? (Do not round
2. Intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.)
c. What is the sensitivity of OCF to changes In the varlable cost figure? (A negatlve
answer should be Indicated by a minus sign. Do not round Intermedlate
calculations and round your answer to the nearest whole number, e.g.., 32.)
units
a-1.
Break-even point
a-2.
DOL
b-1.
Cash flow
NPV
b-2.
ANPVIAQ
C.
AOCF/AVC
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