1. Consider a five-year project with the following information: initial fixed asset investment = $750,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $42/unit; variable costs = $21/unit; fixed costs = $390,000 per year; quantity sold = 100,000 units per year; tax rate = 34%. How sensitive is OCF to changes in quantity sold (i.e., the change in OCF given an increase of one unit sold in a year)?
$16.03
$15.28
$14.71
$13.86
$12.94
2. Michael M. has compiled this information related to a new project: Initial investment: $800,000; Fixed costs: $450,000; Variable costs: $12.00 per unit; Selling price: $37.00 per unit; Discount rate: 10 percent; Project life: 5 years; Tax rate: 34 percent. Fixed assets are depreciated using straight-line depreciation over the project's life. What is the financial break-even point?
26,875
27,102
27,493
27,863
29,140