Consider a three-year project with the following information: initial fixed asset investment = $885,000; straight-line depreciation...

Consider a three-year project with the following information: initial fixed asset investment = $885,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.65; variable costs = $22.85; fixed costs = $213,000; quantity sold = 99,000 units; tax rate = 40 percent.

What is the OCF at the base-case quantity sold?

What is the OCF at 100,000 units sold?

How sensitive is OCF to changes in quantity sold?

Expert Solution

jeff jeffy answered 9 months ago

Consider a four-year project with the following information: initial fixed asset investment = $570,000; straight-line depreciation...

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Consider a four-year project with the following information: initial fixed asset investment = $550,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $36; variable costs = $24; fixed costs = $225,000; quantity sold = 76,000 units; tax rate = 23 percent. a. What is the degree of operating leverage at the given level of output? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) b. What is the degree...

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Consider a five-year project with the following information: initial fixed asset investment = $402,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $31/unit; variable costs = $10.40/unit; fixed costs = $147,000 per year; quantity sold = 84,000 units per year; tax rate = 25%. How sensitive is OCF to changes in quantity sold (i.e., how much does OCF change given an increase of one unit sold in a year)? $14.29 $15.45 $16.10 $13.80 $12.88

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