Question
A 6-year project is expected to generate annual sales of 9,700 units at a price of $84 per unit and a variable cost of $55
A 6-year project is expected to generate annual sales of 9,700 units at a price of $84 per unit and a variable cost of $55 per unit. The equipment necessary for the project will cost $381,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $230,000 per year and the tax rate is 40 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? [Calculate operating cashflow at the original price and at the new price. Sensitivity to price is Change in OCF/Change in Price]
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$4,053
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$4,646
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$4,349
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$5,820
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$5,238
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