Question
Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation to zero over the 5-year life; zero salvage value;
Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation to zero over the 5-year life; zero salvage value; price = $39.31; variable costs = $28.25; fixed costs = $329,000; quantity sold = 86,000 units; tax rate = 23 percent.
a. What is the OCF at the base-case quantity sold?
OCF=
b. What is the OCF at 87,000 units sold?
OCF=
c. How sensitive is OCF to changes in quantity sold?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
School Finance A Policy Perspective
Authors: Allan Odden, Lawrence Picus
6th Edition
1259922316, 9781259922312
