Question: Problem 10-3 Sensitivity Analysis (LO2) A project currently generates sales of $7.9 million, variable costs equal to 41% of sales, and fixed costs of $1.5

Problem 10-3 Sensitivity Analysis (LO2)

A project currently generates sales of $7.9 million, variable costs equal to 41% of sales, and fixed costs of $1.5 million. The firm's tax rate is 35%. What are the effects of the following changes on after-tax profits and cash flows?
a. Sales increase from $7.9 million to $9.9 million. What are the effects on after-tax profits and cash flows?(Round your answers to 3 decimal places. Enter your answers in millions of dollars.)
After-tax profits (Click to select)decreaseincrease by $ million.
After-tax cash flow (Click to select)increasedecrease by $ million.
b. Variable costs increase to 50% of sales. What are the effects on after-tax profits and cash flows? (Round your answers to 3 decimal places. Enter your answers in millions of dollars.)
After-tax profits (Click to select)increasedecrease by $ million.
After-tax cash flow (Click to select)decreaseincrease by $ million.

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