Consider a four-year project with the following information: initial fixed asset

Question

Consider a four-year project with the following information: initial fixed asset investment = $410,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $22; variable costs = $14; fixed costs = $110,000; quantity sold = 71,000 units; tax rate = 32 percent.

How sensitive is OCF to changes in quantity sold?

Consider a four-year project with the following information: initial fixed asset investment = $410,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $22; variable costs = $14; fixed costs = $110,000; quantity sold = 71,000 units; tax rate = 32 percent.

Explanation / Answer

1 % change in units sold will result in 1.122% change in cashflows

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