Question: A project currently generates sales of $10 million, variable costs equal 50% of sales, and fixed costs are $2 million. The firm's tax rate is

A project currently generates sales of $10 million, variable costs equal 50% of sales, and fixed costs are $2 million. The firm's tax rate is 35%. What are the effects of the following changes on cash flow?
a. Sales increase from $10 million to $11 million.
b. Variable costs increase to 65% of sales.

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