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##### We are evaluating a project that costs \$903,000, has an 11-year life,

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We are evaluating a project that costs \$903,000, has an 11-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 104,000 units per year. Price per unit is \$35, variable cost per unit is \$21, and fixed costs are \$908,418 per year. The tax rate is 32 percent, and we require a 19 percent return on this project.;(Do not round your intermediate calculations.);(a) What is the sensitivity of OCF to changes in the variable cost figure?;Multiple choice: \$-71,751 / \$-70,751 / \$69,720 / \$-70,720 / \$71,720;(b) What your answer tells you about a \$1 decrease in estimated variable costs?;Mutiple choice: \$71,720 / \$70,720 / \$72,751 / \$69,720 / \$71,751;(c) What is the degree of operating leverage at the accounting break-even point?;Multiple Choice: 12.166 / 11.966 / 12.066 / 1.19 / 1.091

Paper#25688 | Written in 18-Jul-2015

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