Calculate the cash flows of the base case over six years

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Reference no: EM132004630

Suppose you are considering an investment project that requires $800,000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected to be 65,000 units per year.

Price per unit is $63, variable cost per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS.

The tax rate is 35% and you expect a 20% return on this investment. Determine the break-even sales volume.

Calculate the cash flows of the base case over six years and its NPW. If the sales price per unit increases to $400, what is the required break-even volume?

Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurate to within;15%. What would be the NPW figures of the best-case and worst-case scenarios?

Reference no: EM132004630

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