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Calculate the accounting break-even point

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Question - We are evaluating a project that costs $1,180,000, 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 66,000 units per year. Price per unit is $45, variable cost per unit is $25, and fixed costs are $750,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project.

a. Calculate the accounting break-even point.

b-1. Calculate the base-case cash flow and NPV.

b-2. What Is the sensitivity of NPV to changes In the sales figure?

b-3. Calculate the change in NPV if sales were to drop by 500 units.

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

Reference no: EM133176430

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