Consider a project with a life of 4 years with the following information: initial fixed asset...
Consider a project with a life of 4 years with the following information: initial fixed asset investment = $360,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $36; variable costs = $17; fixed costs = $216,000; quantity sold = 133,920 units; tax rate = 24 percent. How sensitive is OCF to changes in quantity sold?
Homework Answers
OCF sensitivity to change in units:
= (Price per unit-Cost per unit)×(1-Tax rate)
= ($36-$17)×(1-24%)
= $14.44
Hence, OCF sensitivity is $14.44
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