Calculate base-case cash flow and npv-accounting break-even

Assignment Help Financial Management

Reference no: EM131992634

We are evaluating a project that costs $1,120,000, has a ten-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 64,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $620,000 per year. The tax rate is 35 percent, and we require a return of 12 percent on this project.

1. Calculate the accounting break-even point.

2. What is the degree of operating leverage at the accounting break-even point

3. Calculate the base-case cash flow and NPV

4. What is the sensitivity of NPV to changes in the sales figure

5. What is the sensitivity of OCF to changes in the variable cost figure

Reference no: EM131992634

Questions Cloud

What is sustainable growth rate : A firm has an ROA of 10%, a dividend payout ratio of 40%, an Equity Multiplier of 1.60, what is the Sustainable Growth Rate?

Compute the expected rate of return : Compute the expected rate of return on ABC Corporation stock.

What growth rate is expected for the company stock price : If the company plans to pay a dividend of $4.10 next year, what growth rate is expected for the company’s stock price?

What cultural dynamics impact the decision : What are the strategic choices available? What cultural dynamics impact the decision?

Calculate base-case cash flow and npv-accounting break-even : Calculate the accounting break-even point. What is the sensitivity of OCF to changes in the variable cost figure. Calculate the base-case cash flow and NPV

Using futures contracts that will hedge exchange rate risk : Detail a strategy using futures contracts that will hedge your exchange rate risk.

Shareholder wealth maximization and financial leverage : How does this relate to shareholder wealth maximization and financial leverage?

Compare the net present value of each option : Compare the net present value of each option. Which should you take?

Resources target the retiree market for financial advisor : What societies, charities, newsletters and other resources target the retiree market for a financial advisor?

User Account

All Pages