We are evaluating a project that costs $1,100,000, has a ten-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 47,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $820,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project. a-1. Calculate the accounting break-even point.
Break-even point units
a-2. What is the degree of operating leverage at the accountin g break-even point? (Round your answer to 3 decimal places. (e. g., 32.161))
DOL
b-1. Calculate the base-case cash flow and NPV. (Round your NPV answer to 2 decimal places. (e. g., 32.16))
Cash flow $
NPV $
b-2. What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places. (e. g., 32.161))
c. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)