Consider a five-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation...

Consider a five-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $32/unit; variable costs = $15.60/unit; fixed costs = $148,000 per year; quantity sold = 100,000 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)?

Expert Solution

For 1 additional unit sold OCF will increase by $12.30.

jeff jeffy answered 1 year ago

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