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Please show work, prefer excel sheet with the formulas used Thank you!! Answer all If we consider the effect of taxes, then the degree of
Please show work, prefer excel sheet with the formulas used Thank you!! Answer all
If we consider the effect of taxes, then the degree of operating leverage can be written as: DOL = 1 + [FC *(1-TO-Tex DJOCF Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $5,200,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,250,000 and that variable costs should be $235 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $625,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $344 per ton. The engineering department estimates you will need an initial net working capital investment of $500,000. You require a return of 13 percent and face a tax rate of 24. a. What is the percentage change in OCF if the units sold changes to 29,000? (Do not round intermediate calculations and enter your answer as a percent rounded to 4 decimal places, e.g., 32.1616.) b. What is the DOL at the base-case level of output? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) % a. Change in OCF b. DOLStep by Step Solution
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