25 Jul vWHAT IS THE SENSITIVITY OF OCF TO CHANGES IN THE VARIABLE COST FIGURE?
We are evaluating a project that costs $924000 has a four-year life and has no salvage value. Show more We are evaluating a project that costs $924000 has a four-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 87600 units per year. Price per unit is $34.55 variable cost per unit is $20.80 and fixed costs are $756000 per year. The tax rate is 35 percent and we require a return of 13 percent on this project. Requirement 1: Calculate the base-case cash flow and NPV. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g. 32.16).) Base-case cash flow $ NPV $ Requirement 2: What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g. 32.161).) Sensitivity of NPV $ Requirement 3: If there is a 500-unit decrease in projected sales how much would the NPV drop? (Do not round intermediate calculations. Input your answer as a positive value. Round your answer to 2 decimal places (e.g. 32.16).) NPV drop $ Requirement 4: What is the sensitivity of OCF to changes in the variable cost figure? (A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g. 32.16).) Sensitivity of OCF $ Requirement 5: If there is $1 decrease in estimated variable costs how much would the increase in OCF be? (Round your answer to the nearest whole dollar amount (e.g. 1234567).) Increase in OCF $ Show less
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