Purchase Solution

Detailed Explanation to Sensitivity analysis

Not what you're looking for?

Ask Custom Question


Dime a dozen diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $30. The fixed cost incurred each year for factory upkeep and administrative expenses are $200,000. The machinery cost $1 million and is depreciated straight-line over ten years to salvage the value of zero.

A) What is accounting break-even level of sales in terms of number of diamonds sold?

B) What is the NPV break-even level of sales assuming a tax rate of 35%, a 10 year project life, and a discount rate of 12 percent?

Operating Leverage

A project has fixed costs of $1000 per year, depreciation charges of $500 a year, a revenue of $6000 per year, and variable costs equal to two-thirds of revenues.

A) If sales increase by 5%, what will be the increase in pretax profits?

B) What is the degree of operating leverage of this project?

C)Confirm that the percentage change in profits equals DOL times the percentage change in sales.

(Question also in attachment)

Purchase this Solution

Solution Summary

A detailed explanation of a sensitivity analysis is given.

Purchase this Solution

Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.