Calculate the accounting break-even point

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Could you please help to answer the below question and show how this could be determined in excel as well?

Sensitivity Analysis and Break-Even Point. We are evaluating a project that costs $604,000, has an 8 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 55,000 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project.

a) Calculate the accounting break-even point.

b) Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales.

c) What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in estimated variable costs.

Reference no: EM132347979

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