Sensitivity of ocf to changes in the variable cost figure

Assignment Help Financial Management
Reference no: EM131878318

We are evaluating a project that costs $908,000, has a four-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 87,200 units per year. Price per unit is $34.35, variable cost per unit is $20.60, and fixed costs are $752,000 per year. The tax rate is 40 percent, and we require a return of 13 percent on this project. 1. Calculate the base-case operating cash flow and NPV 2. What is the sensitivity of NPV to changes in the sales figure? 3. If there is a 500-unit decrease in projected sales, how much would the NPV drop? 4. What is the sensitivity of OCF to changes in the variable cost figure? 5. If there is $1 decrease in estimated variable costs, how much would the increase in OCF be?

Reference no: EM131878318

Questions Cloud

What is the current price of bond : Suppose a bond with 5 years to maturity. what is the current price of the bond? Use TI BA II functions.
How do you approach this opportunity : He believes that he'll be able to return your cash, plus $100,000, in five years. How do you approach this opportunity?
Find the term of the compound interest loan : Find the term of the compound interest loan
What are arithmetic and geometric returns for stock : What are the arithmetic and geometric returns for the stock?
Sensitivity of ocf to changes in the variable cost figure : What is the sensitivity of OCF to changes in the variable cost figure?
The loan is not capped at the current appraised value : what will be the loan balance when the borrower dies after 22 years if the loan is not capped at the current appraised value?
Level monthly payments at the end of each month : Level monthly payments at the end of each month for 30 years at a nominal interest rate of 12% convertible monthly
Incremental annual borrowing cost for additional loan : What is the incremental annual borrowing cost for the additional loan amount if each loan is outstanding for the full term?
Calculate the present value of the compound interest loan : Calculate the present value of the compound interest loan.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the price of bond with coupon rate

What is the price of a bond with a coupon rate of 4.50%, a yield to maturity of 4.25%, a future value of $1000, semi-annual coupon payments, and 9 years until maturity?

  Using the fcf model-what is the value of the firm

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 30 percent. Assume her FCF is expected to grow at ..

  Describe potential capital expenditure project from industry

For your second posting, describe a potential capital expenditure project from the industry in which you now work or an industry in which you are interested. What is the project? Describe and provide an approximate value of the initial cash flow. Des..

  The bonds make semiannual payments-yield to maturity

Stein Co. issued 16-year bonds two years ago at a coupon rate of 9 percent. The bonds make semiannual payments.

  What is company current stock price

If High Growth's required rate of return is 12.5%, what is company's current stock price?

  Why is beta theoretically correct measure of a stock risk

Why is beta the theoretically correct measure of a stock’s risk?

  Calculate economic ordering quantity

What is Novelty Medical Pacemakers' current total annual inventory cost? Calculate the economic ordering quantity (EOQ).

  Different companies with the market share

The duck call industry includes four different companies with the following market share:

  Explain the concept of cost of capital

Explain the concept of cost of capital? Should a firm use the same cost of capital for all of its projects? Why or why not?

  The us dollar equivalent

The us dollar equivalent is 0.3841 for the Brazilian real and 1.8759 for the U.K. pound. this means that

  What is the dividend yield and capital gains yield

ABC Corporation paid $2 per share dividend last year. The company is a supernormal growth and its earnings are expected to grow at a 25 percent rate for the next 3 years, 15% rate over the following 2 years and 5 percent thereafter. What are the pric..

  Trading strategy to take advantage of the opportunity

Are there any arbitrage opportunities? If so, construct a trading strategy to take advantage of the opportunity.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd