Base-case cash flow and net present value

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Rengo Packaging Bhd need to evaluate a project with costs of RM744,000.

The project has an 8 years life with no salvage value. Assume the depreciation is straight-line to zero over the life of the project. Units sales which are projected per year is 80,000.

Price per unit is RM47, variable cost per unit is RM31, and fixed costs are RM825,000 per year. The tax rate is 30 percent, and Rengo Packaging Bhd requires 20 percent return on this project. Compute:

(a) Accounting break-even point.

(b) Base-case cash flow and Net Present Value (NPV).

(c) Net Present Value (NPV) if the sales decreases by 500 units.

(d) Operating Cash Flow (OCF) to changes in the RM1 decrease in variable costs.

Reference no: EM132769732

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