Adept NV is analyzing a proposed project.The company expects to sell 2,500 units, give or take 10%.The expected variable cost per unit is €8 and the expected ﬁxed costs are €12,500.Cost
Estimates are considered accurate within a plus or minus 5% range.The depreciation expense is
€4,000.The sale price is estimated at €16 a unit, give or take 2%.The company bases its sensitivity
Analysis on the expected case scenario.The company is conducting a sensitivity analysis on the
Sales price using a sales price estimate of €17.Using this value, the earnings before interest and
Taxes will be:

Question

Quizplus · Accepted Answer

The earnings before interest and taxes (EBIT) is calculated as follows: Revenue - Variable Costs - Fixed Costs - Depreciation. With a sales price of €17, the revenue is 2,500 units * €17 = €42,500. Variable costs are 2,500 units * €8 = €20,000. Fixed costs are €12,500 and depreciation is €4,000. Thus, EBIT = €42,500 - €20,000 - €12,500 - €4,000 = €6,000.

Adept NV Is Analyzing a Proposed Project