Question
A project generates $8,500 revenue each year. It has the following costs: Fixed cost: $ 1,500/year Variable cost 70% of revenue Depreciation: $300/year A) if
A project generates $8,500 revenue each year. It has the following costs:
Fixed cost: $ 1,500/year
Variable cost 70% of revenue
Depreciation: $300/year
A) if sales increases by 20%, what will be the increase in pretax profits?(Hint: calculate the base case pretax profits first then apply the sales growth)
B) What is the degree of operating leverage (DOL) for this project?
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
