Consider a project with the following information: Initial fixed asset investment = $485,000; straight-line depreciation to zero
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Consider a project with the following information: Initial fixed asset investment = $485,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $41; variable costs = $24; fixed costs = $189,000; quantity sold = 90,000 units; tax rate = 23 percent. How sensitive is OCF to changes in quantity sold?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Using the tax shield approach the OCF at 90000 units will be ...View the full answer
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Related Book For 
Corporate Finance
ISBN: 978-1259918940
12th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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