Which one of these occurs at the financial break-even point? Fixed costs equal variable costs EBIT equals zero Net income equals zero Net present value equals zero IRR equals zero QUESTION 10 A company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 15,000 units, ±5 percent. The expected variable cost per unit is $8 and the expected fixed costs are $40,000. The fixed and variable cost estimates are considered accurate within a ±7 percent range. The sales price is estimated at $15 a unit, ±6 percent. The project requires an initial investment of $120,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $30,000 at the end of the project. The project requires $12,000 in net working capital for the three years but will be fully recovered when the project closes. The discount rate is 10 percent and tax rate is 22 percent. What is the operating cash flow under the optimistic case scenario? $83,715.10 $80,971.40 O $78,227.70 $75,484.00 $86,458.80
Which one of these occurs at the financial break-even point? Fixed costs equal variable costs EBIT equals zero Net income equals zero Net present value equals zero IRR equals zero QUESTION 10 A company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 15,000 units, ±5 percent. The expected variable cost per unit is $8 and the expected fixed costs are $40,000. The fixed and variable cost estimates are considered accurate within a ±7 percent range. The sales price is estimated at $15 a unit, ±6 percent. The project requires an initial investment of $120,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $30,000 at the end of the project. The project requires $12,000 in net working capital for the three years but will be fully recovered when the project closes. The discount rate is 10 percent and tax rate is 22 percent. What is the operating cash flow under the optimistic case scenario? $83,715.10 $80,971.40 O $78,227.70 $75,484.00 $86,458.80
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
Problem 1PS
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Transcribed Image Text:QUESTION 9
Which one of these occurs at the financial break-even point?
Fixed costs equal variable costs
0 0 0 0 0
EBIT equals zero
Net income equals zero
Net present value equals zero
IRR equals zero
QUESTION 10
A company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell
15,000 units, ±5 percent. The expected variable cost per unit is $8 and the expected fixed costs are $40,000. The fixed
and variable cost estimates are considered accurate within a ±7 percent range. The sales price is estimated at $15 a
unit, ±6 percent. The project requires an initial investment of $120,000 for equipment that will be depreciated using
the straight-line method to zero over the project's life. The equipment can be sold for $30,000 at the end of the project.
The project requires $12,000 in net working capital for the three years but will be fully recovered when the project
closes. The discount rate is 10 percent and tax rate is 22 percent. What is the operating cash flow under the optimistic
case scenario?
$83,715.10
$80,971.40
$78,227.70
$75,484.00
$86,458.80
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