We are evaluating a project that costs RM604,000, has an 8-year life, and has no salvagevalue. Assume that depreciation is straight-line to zero over the life of the project. Sales areprojected at 55,000 units per year. Price per unit is RM36, variable cost per unit is RM17, andfixed costs are RM685,000 per year. The tax rate is 21 percent and we require a return of 15percent on this project.(i) Calculate the base-case cash flow and NPV.,(ii) Assume the sales figure increases to 56,000 units per year, calculate the sensitivity of NPVto changes in the sales figure?

Initial cost = $604000 Depreciation as per SLM = (604000 -0)/8 = 75500 Depreciation tax shield =…

Answered: We are evaluating a project that costs…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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