[2] Operating Leverage Here is your initial estimate for your project with three scenarios, Normal, Slump, and Boom. Now you have initial estimate for your competitors with same expected sales level. Your project requires initial investment of $5.4 Million while competitors require initial investment of $5.4 Million. Both projects are expected to generate OCF for next 12 years. YOU Competitor High DOL Moderate DOL Higher Fixed Costs High Variable Costs Normal Slump Boom Norma! Slump Boom 5,400,000 5,400,000 5,400,000 5,200,000 5,200,000 5,200,000 16,000 13,000 19,000 16,000 13,000 19,000 13,000 10,563 15,438 13,440 10,920 15,920 2,000 2,000 2,000 1,560 1,560 1,560 Initial Cost Sales Variable Costs Fixed Costs Depreciation 450 450 450 450 450 4501 = Pretax Profit 550 (13) 1,112 550 70 1,070 Q1. What is the main difference between your project and competitors? How many % OCF changes as sales level changes under Normal condition? To answer the question, find the Degree of Operating Leverage (DOL) of your and competitor's project. *DOL = 1 (FC /OCF)