Question: We are evaluating a project that costs $839818, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $839818, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 58870 units per year. Price per unit is $36, variable cost per unit is $22, and fixed costs are $424083 per year. The tax rate is 35%, and we require a return of 20% on this project. In dollar terms, what is the sensitivity of OCF to changes in the variable cost per unit projection?
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