Question: Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation to zero over the 5-year life; zero salvage value;

Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation to zero over the 5-year life; zero salvage value; price = $39.31; variable costs = $28.25; fixed costs = $329,000; quantity sold = 86,000 units; tax rate = 23 percent.

a. What is the OCF at the base-case quantity sold?

OCF=

b. What is the OCF at 87,000 units sold?

OCF=

c. How sensitive is OCF to changes in quantity sold?

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