Question: Consider a three-year project with the following information: initial fixed asset investment = $375,000; straight-line depreciation to zero over the three-year life; zero salvage value;

Consider a three-year project with the following information: initial fixed asset investment = $375,000; straight-line depreciation to zero over the three-year life; zero salvage value; price = $28.20; unit variable cost = $13.50; fixed costs = $300,000; quantity sold = 30,000 units; tax rate = 25%. How sensitive is OCF to changes in quantity sold (i.e., the change in OCF given one unit increase in quantity)?

$11.48

$11.25

$11.02

$10.77

$10.54

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!