courses offered in B Course Capture D Hero is he alone wh Gfiestoreagaorguks SGC
ID: 2782287 • Letter: C
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courses offered in B Course Capture D Hero is he alone wh Gfiestoreagaorguks SGCSEB Question 4 (of 9) value: 11.11 points We are evaluating a project that costs $768,000, has a six-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 57,000 units per year Price per unit is S60, variable cost per unit is $35, and fixed costs are $770,000 per year. The tax rate is 35 percent, and we require a 15 percent return on this project a-1 Calculate the accounting break-even point Break-even point 35920 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)) 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 salos figure? (Do not round intelmediate calculations and round your answer to 3 decimal places. fe.g.. 32.161) 10 Type here to search F4 F6 F7 F8 F9 F10 11Explanation / Answer
Accounting Break-even = (FC + Depreciation) / (P - VC) = (770,000 + 128,000) / (60 - 35) = 35,920
DOL at accounting breakeven point = 1 + FC / D = 1 + 770,000 / 128,000 = 7.016
Cash Flows = Depreciation + Net Income = 470,550
NPV = 1,012,788.33
If Q is increased by 1 unit, change in NPV = $61.50
If VC is increased by $1, change in OCF = -$37,050
0 1 2 3 4 5 6 Investment -768000 Sales 3420000 3420000 3420000 3420000 3420000 3420000 VC -1995000 -1995000 -1995000 -1995000 -1995000 -1995000 FC -770000 -770000 -770000 -770000 -770000 -770000 Depreciation -128000 -128000 -128000 -128000 -128000 -128000 EBT 527000 527000 527000 527000 527000 527000 Tax (35%) -184450 -184450 -184450 -184450 -184450 -184450 Net Income 342550 342550 342550 342550 342550 342550 Cash Flows -768000 470550 470550 470550 470550 470550 470550 NPV $1,012,788.33Related Questions
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