A project has fixed costs of $ 1,000 per year, depreciation charges of $500 a year, annual

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A project has fixed costs of $ 1,000 per year, depreciation charges of $500 a year, annual revenue of $6,000, and variable costs equal to two-thirds of revenues.

a. If sales increase by 10%, what will be the increase in pretax profits?

b. What is the degree of operating leverage of this project?

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Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus

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Question Posted: Jun 30, 2016 09:22 AM

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A project has fixed costs of $ 1,000 per year, depreciation charges of $500 a year, annual

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a Pretax profits currently equal Revenue variable costs fixed costs depre...View the full answer

Fundamentals of Corporate Finance

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