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Homework answers / question archive / We are evaluating a project that costs $835,986, has an eight-year life, and has no salvage value

We are evaluating a project that costs $835,986, has an eight-year life, and has no salvage value

Finance

We are evaluating a project that costs $835,986, 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 56,693 units per year. Price per unit is $38, variable cost per unit is $18, and fixed costs are $420,383 per year. The tax rate is 35%, and we require a return of 19% on this project.

 

In dollar terms, what is the sensitivity of NPV to changes in the units sold projection? 

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