Sensitivity Analysis Consider a four-year project with the following information: initial fixed asset investment = $460,000; straight-line

Question:

Sensitivity Analysis Consider a four-year project with the following information: initial fixed asset investment = $460,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $26; variable costs = $18; fixed costs = $190,000; quantity sold = 110,000 units; tax rate 34 percent. How sensitive is OCF to changes in quantity sold?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...