We are evaluating a project that costs $880,000, has a life of 14 years, and has...

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We are evaluating a project that costs $880,000, has a life of14 years, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 146,000 units per year. Price per unit is $38,variable cost per unit is $23, and fixed costs are $894,080 peryear. The tax rate is 22 percent, and we require a return of 11percent on this project.
1a. Calculate the accounting break-even point.
1b. What is the degree of operating leverage at the accountingbreak-even point?
2a. Calculate the base-case cash flow.
2b. Calculate the NPV.
2c. What is the sensitivity of NPV to changes in the quantitysold?
2d. What your answer tells you about a 500-unit decrease in thequantity sold?
3a. What is the sensitivity of OCF to changes in the variablecost figure?
3b. How much will OCF change if variable costs decrease by$1?

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We are evaluating a project that costs $880,000, has a life of14 years, and has no salvage value. Assume that depreciation isstraight-line to zero over the life of the project. Sales areprojected at 146,000 units per year. Price per unit is $38,variable cost per unit is $23, and fixed costs are $894,080 peryear. The tax rate is 22 percent, and we require a return of 11percent on this project.1a. Calculate the accounting break-even point.1b. What is the degree of operating leverage at the accountingbreak-even point?2a. Calculate the base-case cash flow.2b. Calculate the NPV.2c. What is the sensitivity of NPV to changes in the quantitysold?2d. What your answer tells you about a 500-unit decrease in thequantity sold?3a. What is the sensitivity of OCF to changes in the variablecost figure?3b. How much will OCF change if variable costs decrease by$1?