2. Shades, Inc. has a new pair of sunglasses it is evaluating. The company expects to...
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2. Shades, Inc. has a new pair of sunglasses it is evaluating. The company expects to sell 6,800 pairs of sunglasses at a price of $165 each and a variable cost of $115 each. The equipment necessary for the project will cost $333,000 and will be depreciated on a straight-line basis over the 6- year life of the project. Fixed costs are $240,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $5 increase in variable costs per pair of sunglasses? 2. Shades, Inc. has a new pair of sunglasses it is evaluating. The company expects to sell 6,800 pairs of sunglasses at a price of $165 each and a variable cost of $115 each. The equipment necessary for the project will cost $333,000 and will be depreciated on a straight-line basis over the 6- year life of the project. Fixed costs are $240,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $5 increase in variable costs per pair of sunglasses?
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