# Question: we are evaluating a project that costs 848000 has an...

###### Question details

We are evaluating a project that costs $848,000, has an
eight-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 62,000 units per year. Price per unit is $40, variable
cost per unit is $20, and fixed costs are $636,000 per year. The
tax rate is 35 percent, and we require a return of 20 percent on
this project.

**a.** Calculate the accounting break-even point.
**(Do not round intermediate calculations and round your
answer to the nearest whole number, e.g., 32.)**

Break-even
point units

**b-1** Calculate the base-case cash flow and NPV.
**(Do not round intermediate calculations and 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.)**

ΔNPV/ΔQ $

**b-3**Calculate the change in NPV if sales were to drop by 500 units.

**(Enter your answer as a positive number. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)**

NPV would (Click to select) increase decrease by $

**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.)**

ΔOCF/ΔVC $