Question: Consider a five-year project with the following information: initial fixed asset investment = $470,000; straight-line depreciation to zero over the five-year life; zero salvage value;

  1. Consider a five-year project with the following information: initial fixed asset investment = $470,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $51.60/unit; variable costs = $17.50/unit; fixed costs = $510,000 per year; quantity sold = 100,000 units per year; tax rate = 25%. How sensitive is OCF to changes in quantity sold (i.e., how much does OCF change given an increase of one unit sold in a year)?

    $23.44

    $24.12

    $25.58

    $26.37

    $27.16

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