In the previous problem, suppose the projects given for price, quantity, variable costs, and fixed costs are all accurat

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In the previous problem, suppose the projects given forprice, quantity, variable costs, and fixed costs are all accurateto within +/- 10 percent. Calculate the best-case and worst caseNPV figures. (previous problem as in the one below)
We are evaluating a project that costs $588,000; has aneight-year life and has no salvage value. Assume that depreciationis straight-line to zero over the life of the project. Sales areprojected at 70,000 units per year. Price per unit is $36, variablecost per unit is $20, and fixed costs are $695,000 per year. Thetax rate is 35 percent, and we require a return of 15 percent onthis project. Part a: Calculate the accounting break even. Part b:Calculate the base-case cash flow and NPV. What is the sensitivityof NPV to changes in the sales figure? Explain what your answertells you about a 500-unit decrease in projected sales? (ProfessorCursio comments: some textbooks use the term “sensitivity” toliterally mean add one and/or subtract one unit of something – inthis case sales – to see what the changes are. But for ourpurposes, the only sensitivity we care about is what the effectwould be if sales are 500 units less than the base-caseprojection.) Part c: What is the sensitivity of OFC to changes inthe variable cost figure? Explain what your answer tells you abouta $1 decrease in variables costs. (Professor Cursio comments:similar to part b, all we care about is the effect of variablecosts being one dollar less than the base-caseprojection.)