Consider four-year project with the following information: initial fixed asset investment = $400,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $20; variable costs = $15; fixed costs = $280,000; quantity sold = 150,000 units; tax rate = 34%.

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

2. What is the degree of operating leverage at the given level of output? What is the degree of

   operating leverage at the accounting break-even level of output?

Problem 10.4 Consider four-year project with the following information: initial fixed asset investment = $400,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $20; variable costs = $15; fixed costs = $280,000; quantity sold = 150,000 units; tax rate = 34%. a How sensitive is OCF to changes in quantity sold? b. What is the degree of operating leverage at the given level of output? What is the degree of operating leverage at the accounting break-even level of output