Consider a three-year project with the following information: initial fixed asse

Question

Consider a three-year project with the following information: initial fixed asset investment = $870,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.05; variable costs = $22.55; fixed costs = $210,000; quantity sold = 96,000 units; tax rate = 34 percent.

How sensitive is OCF to changes in quantity sold? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).)

Consider a three-year project with the following information: initial fixed asset investment = $870,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.05; variable costs = $22.55; fixed costs = $210,000; quantity sold = 96,000 units; tax rate = 34 percent.

Explanation / Answer

Current Increase in Qauntity Decrease in Quantity Selling Price 34.05 34.05 34.05 Variable Cost 22.55 22.55 22.55 Contribution per unit 11.5 11.5 11.5 Number of units sold 96000 100000 90000 Total contribution for units sold 1104000 1150000 1035000 Less: Depreciation (870000

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