# FINA 3001 – We are evaluating a project that costs \$832,000, has an eight-year life

01 / 10 / 2021 Projects

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## FINA 3001 – We are evaluating a project that costs \$832,000, has an eight-year life

We are evaluating a project that costs \$832,000, 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 40,000 units per year. Price per unit is \$40, variable cost per unit is \$15, and fixed costs are \$700,000 per year. The tax rate is 35 percent, and we require a 18 percent return on this project.a.Calculate the accounting break-even point. (Do not round intermediate calculations and round your final answer to nearest whole number. (e.g., 32)) Break-even pointunits b-1Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answers to 2 decimal places. (e.g., 32.16)) Cash flow \$ NPV\$ b-2What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161)) ?NPV/?Q\$ c.What is the sensitivity of OCF to changes in the variable cost figure? (Do not round intermediate calculations and Negative amount should be indicated by a minus sign.) ?OCF/?VC\$

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