Calculate the accounting break-even point

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Evaluate a project that costs $1.75 million has a 10-year life and no salvage value. Assume depreciation is straight line over the life of the project. Sales are projected at 155K units every year over the life of the project. Price per unit is $85, variable costs are $50 per unit, and fixed costs are $1,250,000 per year. The tax rate is 30% and the required rate of return is 15% after tax. Calculate: the accounting break-even point; the operating leverage at this break-even point; the base-case cash flow and its NPV. Also compute the impact of a 10% decrease in expected sales.

Reference no: EM131047718

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