Question: A project has the following estimated data: price = $150 per unit; variable costs = $88 per unit; fixed costs = $250,000; required return =

A project has the following estimated data: price = $150 per unit; variable costs = $88 per unit; fixed costs = $250,000; required return = 11%; initial investment = $200,000; $50,000 salvage value; life = ten years.

What is the degree of operating leverage at the financial break-even level of output? If the sales increase by 3 percent from FBE quantity, what would be the value of OCF (for this part use the definition of the DOL as the proportion of percentage change in OCF to the percentage change in sales)?

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