Use the following case information to evaluate the project below: PQRZ has a project that costs…

Use the following case information to evaluate the project below:
PQRZ has a project that costs $850,000, has a life of five years, and has a salvage value of $150,000. Depreciation is a straight-line to zero. The required return is 15% and the tax rate is 34%. Sales are projected at 3550 units per year. Price per unit is $500. Variable costs per unit are $300 and fixed costs are $250,000 per year. Note that depreciation expense is $190,000 per year and the engineering department estimates you will need an initial net working capital investment of $70,000.
 
a) Scenario Analysis
If the projected number of sales, prices, variable costs, and fixed costs are given
accurate by 7%.
1) Determine the upper and lower limits for the projection
2) Determine the NPV of the base-case scenario for the project
3) Determine the NPV of the project in best-case and worst-case scenarios
b) Sensitivity Analysis
Calculate the sensitivity of OCF to changes in the variable cost in the base-case
scenario
c) Break-even Analysis
Based on the base-case scenario of the above case, calculate the cash break-even,
accounting break-even, and financial break-even from the case.
d) Operating Leverage
Calculate the degree of operating leverage in the base-case scenario