We are evaluating a project that costs $1,120,000, has a ten-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 64,000 units per year. Price per unit is $50, variable cost per unit is $25, and fixed costs are $620,000 per year. The tax rate is 35 percent, and we require a 12 percent return on this project.
1. Calculate the accounting break-even point.
2. What is the degree of operating leverage at the accounting break-even point? (Round your answer to 3 decimal places. (e.g., 32.161))
3. Calculate the base-case cash flow and NPV. (Round your NPV answer to 2 decimal places. (e.g., 32.16))
4. 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))
5. What is the sensitivity of OCF to changes in the variable cost figure? (Negative amount should be indicated by a minus sign.)