The operating leverage at this break-even point

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Reference no: EM13730711

Evaluate project that costs $1.5 million has a 10-year life and no salvage value. Assume depreciation is straight line over the life of the project. Sales are projected at 150K units every year over the life of the project. Price per unit is $75, variable costs are $45 per unit, and fixed costs are $1,275,000 per year. The tax rate is 30% and the required rate of return is 15% after tax.

Calculate: the accounting break-even point; the operating leverage at this break-even point; the base-case cash flow and its NPV. Also compute impact 10% decrease in expected sales or 5% increase in projected variable costs.

Reference no: EM13730711

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