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Consider a four-year project with the following information: initial fixed asset investment = $470545; 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 = $470545; straight-line depreciation to zero over the four-year life; zero salvage value; price = $34; variable costs = $23; fixed costs = $190534; quantity sold = 78463 units; tax rate = 38 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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