What is the sensitivity of npv to changes in sales figure

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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: EM131878323

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