Question: P11-17 Sensitivity Analysis [LO1] Consider a project with a life of 8 years with the following information: initial fixed asset investment = $400,000; straight-line depreciation

 P11-17 Sensitivity Analysis [LO1] Consider a project with a life of

P11-17 Sensitivity Analysis [LO1] Consider a project with a life of 8 years with the following information: initial fixed asset investment = $400,000; straight-line depreciation to zero over the 8-year life; zero salvage value; price = $25; variable costs = $14; fixed costs = $228,000; quantity sold = 134,520 units; tax rate = 24 percent. How sensitive is OCF to changes in quantity sold? [Calculate OCF with data given, and also for an arbitrary quantity, say 1000 units more. Sensitivity is (OCF2 - OCF1)/(Q2 -Q1). This is OCF per unit change in Q]

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!