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Consider a project with a life of 4 years with the following information: initial fixed asset...

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Finance

Consider a project with a life of 4 years with the followinginformation: initial fixed asset investment = $380,000;straight-line depreciation to zero over the 4-year life; zerosalvage value; price = $28; variable costs = $15; fixed costs =$121,600; quantity sold = 54,720 units; tax rate = 25 percent. Howsensitive is OCF to changes in quantity sold?

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Solution sensitive of OCF to changes in quantity sold 975 Means for 1 unit sales increase increases OCF by 975 Working Notes Operating cash flows at 54720 units price variable cost x annual quantity fixed    See Answer
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Consider a project with a life of 4 years with the followinginformation: initial fixed asset investment = $380,000;straight-line depreciation to zero over the 4-year life; zerosalvage value; price = $28; variable costs = $15; fixed costs =$121,600; quantity sold = 54,720 units; tax rate = 25 percent. Howsensitive is OCF to changes in quantity sold?

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