I need the operating cashflow and the new DOL 2. value: 1.00 points A proposed p

Question

I need the operating cashflow and the new DOL

2. value: 1.00 points A proposed project has fixed costs of $100,000 per year. The operating cash flow at 8,000 units is $89,000. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) Degree of operating leverage 2.12 If units sold rise from 8,000 to 8,500, what will be the new operating cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Operating cash flow $94,562.5 What is the new degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) New DOL 2.05

Explanation / Answer

Fixed Costs =$100,000

OCF =$89,000

Units Sold = 8,000

a.) Degree of Operating Leverage = 1 + Fixed Cost/OCF =1 + 100,000/89,000 =1+1.1236 =2.12

b.) Revised Units Sold =8,500

New Operating Cash Flow = 89,000 x 8,500/8,000 =$94,562.50

c.) New Degree of Operating Leverage = 1+FC/OCF =1 + 100,000/94,562.50 =1 + 1.0575 =2.0575 or 2.06

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