Sensitivity of net present value to changes in fixed costs

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A fixed asset for a project costs $1, 200, has a 6-year life, and has no salvage value. Depreciation is straight-line to zero over the life of the project. Sales are projected at 110 units per year. Price per unit is $34, variable cost per unit is $18, and fixed costs are $900 per year. The firm has other profitable opportunities sufficient to cover any losses. The tax rate is 35% and the required return is 15%. Find the cash flow from assets in the base case and the sensitivity of net present value to changes in fixed costs.

Reference no: EM131545759

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