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Consider a four-year project with the following information: initial fixed asset investment = $477899; straight-line depreciation to zero over the four-year life; zero salvage value;
Consider a four-year project with the following information: initial fixed asset investment = $477899; straight-line depreciation to zero over the four-year life; zero salvage value; price = $34; variable costs = $25; fixed costs = $188144; quantity sold = 79950 units; tax rate = 33 percent. Calculate the sensitivity of the OCF to changes in the quantity sold.
[Hint: Think of this as, "How much does OCF change if we can sell one more unit each year?"]
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