In the previous problem, suppose fixed costs are $175,000. What is the operating cash flow at 43,000 units? The degree of operating leverage? Data from previous problem At an output level of 45,000 units, you calculate that the degree of operating leverage is 2.79. If output rises to 48,000 units, what will the percentage change in operating cash flow be?
Chapter 11, Questions and Problems #12
In the previous problem, suppose fixed costs are $175,000. What is the operating cash flow at 43,000 units? The degree of operating leverage?
Data from previous problem
At an output level of 45,000 units, you calculate that the degree of operating leverage is 2.79. If output rises to 48,000 units, what will the percentage change in operating cash flow be? Will the new level of operating leverage be higher or lower? Explain.
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Answer
Using the DOL equation, we find: DOL = 1 + FC/OCF 2.79 = 1 + $175,000/OCF OCF = $97,765 T…View the full answer
Related Book For 
Fundamentals of Corporate Finance
12th edition
Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan
ISBN: 978-1260153590