Sensitivity analysis and break-even point

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Sensitivity Analysis and Break-Even Point We are evaluating a project that costs $836,000, has an eight-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 93,000 units per year. Price per unit is $43, variable cost per unit is $28, and fixed costs are $945,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. 1. Calculate the accounting break-even point. 2. 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. 3. 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: EM131044646

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