We are evaluating a project that costs $585,000, 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 85,000 units per year. Price per unit is $37, variable cost per unit is $23, and fixed costs are $675,000 per year. The tax rate is 21 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Break-even point a-2. DOL b-1. Cash flow b-1. NPV b-2. ANPV/AQ c. AOCF/AVC units
We are evaluating a project that costs $585,000, 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 85,000 units per year. Price per unit is $37, variable cost per unit is $23, and fixed costs are $675,000 per year. The tax rate is 21 percent, and we require a return of 9 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round 2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Break-even point a-2. DOL b-1. Cash flow b-1. NPV b-2. ANPV/AQ c. AOCF/AVC units
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 13P
Question
please give me the correct answer
![We are evaluating a project that costs $585,000, 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 85,000 units per year. Price per unit is $37, variable cost per unit is $23,
and fixed costs are $675,000 per year. The tax rate is 21 percent, and we require a
return of 9 percent on this project.
a-1.Calculate the accounting break-even point. (Do not round intermediate calculations
and round your answer to the nearest whole number, e.g., 32.)
a- What is the degree of operating leverage at the accounting break-even point? (Do
2. not round intermediate calculations and round your answer to 3 decimal places,
e.g., 32.161.)
b- Calculate the base-case cash flow and NPV. (Do not round intermediate
1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32.
Round your NPV answer to 2 decimal places, e.g., 32.16.)
b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round
2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative
answer should be indicated by a minus sign. Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.)
a-1. Break-even point
a-2. DOL
b-1. Cash flow
b-1. NPV
b-2. ANPV/AQ
c. AOCF/AVC
units](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9737efd-391f-457a-98f6-aa044a0527f1%2Fedfb18e4-ff28-4fa7-83a6-5783243e10b2%2Frm91nzt_processed.png&w=3840&q=75)
Transcribed Image Text:We are evaluating a project that costs $585,000, 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 85,000 units per year. Price per unit is $37, variable cost per unit is $23,
and fixed costs are $675,000 per year. The tax rate is 21 percent, and we require a
return of 9 percent on this project.
a-1.Calculate the accounting break-even point. (Do not round intermediate calculations
and round your answer to the nearest whole number, e.g., 32.)
a- What is the degree of operating leverage at the accounting break-even point? (Do
2. not round intermediate calculations and round your answer to 3 decimal places,
e.g., 32.161.)
b- Calculate the base-case cash flow and NPV. (Do not round intermediate
1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32.
Round your NPV answer to 2 decimal places, e.g., 32.16.)
b- What is the sensitivity of NPV to changes in the quantity sold? (Do not round
2. intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. What is the sensitivity of OCF to changes in the variable cost figure? (A negative
answer should be indicated by a minus sign. Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.)
a-1. Break-even point
a-2. DOL
b-1. Cash flow
b-1. NPV
b-2. ANPV/AQ
c. AOCF/AVC
units
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)