We are evaluating a project that costs $1,140,000, has a five-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 87,300 units per year. Price per unit is $34.40, variable cost per unit is $20.65, and fixed costs are $753,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project.
Required: Base-case cash flow:
NPV:
Sensitivity of NPV:
If there is a 500-unit decrease in projected sales, how much wuold the NPV drop? Round to 2 decimal places. NPV drop:
Senstivity to OCF:
If there is a $1 decrease in estimated varialbe costs, how much would the increase in OFC be?
Increase in OCF:
We are evaluating a project that costs $1,140,000, has a five-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 87,300 units per year. Price per unit is $34.40, variable cost per unit is $20.65, and fixed costs are $753,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project.
Required: Base-case cash flow:
NPV:
Sensitivity of NPV:
If there is a 500-unit decrease in projected sales, how much wuold the NPV drop? Round to 2 decimal places. NPV drop:
Senstivity to OCF:
If there is a $1 decrease in estimated varialbe costs, how much would the increase in OFC be?
Increase in OCF:
Related questions
We are evaluating a project that costs $1,140,000, has a five-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 87,300 units per year. Price per unit is $34.40, variable cost per unit is $20.65, and fixed costs are $753,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project.
| Required: |
| Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within |
| We are evaluating a project that costs $1,446,000, 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 88,600 units per year. Price per unit is $35.05, variable cost per unit is $21.30, and fixed costs are $766,000 per year. The tax rate is 30 percent, and we require a return of 11 percent on this project. 1) Calculate the base-case 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? |
