Question
Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production with other details as follows: - Initial investment of
Consider a project to supply Detroit with 40,000 tons of machine screws annually for automobile production with other details as follows:
- Initial investment of $5,600,000 in threading equipment
- the project will last for 6 years.
-The accounting department estimates that annual fixed costs will be $600,000
-variable costs should be $250 per ton.
- depreciate initial investment straight-line to 0 over 6 years with salvage value of $450,000
-contract at selling price of $340 per ton
- the engineering department estimates you will need an initial net working capital investment of $560,000.
- return of 13% and marginal tax rate of 24%
(1)Whats the sensitivity of the project OCF to changes in quantity supplied?
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