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Business, 31.03.2021 04:00 minnie7760

We are evaluating a project that costs $786,000, has an eight-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 65,000 units per year. Price per unit is $48, variable cost per unit is $25, and fixed costs are $725,000 per year. The tax rate is 22%, and we require a return of 10% on this project. A. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?
B. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the quantity sold?
C. What is the sensitivity of OCF to changes in the variable cost figure?

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We are evaluating a project that costs $786,000, has an eight-year life, and has no salvage value. A...
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