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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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