Question: Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,500 pairs of sunglasses at a price of $150

Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,500 pairs of sunglasses at a price of $150 each and a variable cost of $102 each. The equipment necessary for the project will cost $290,000 and will be depreciated on a straight-line basis over the 6-year life of the project. Fixed costs are $160,000 per year and the tax rate is 40 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

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