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QUESTION 5 A project has the following estimated data: price = $26 per unit: variable costs = $18 per unit: fixed costs = $195,000; required
QUESTION 5 A project has the following estimated data: price = $26 per unit: variable costs = $18 per unit: fixed costs = $195,000; required return = 12%; initial fixed assets investment = $475,000; straight-line depreciation to zero over the four-year life; zero salvage value. Number units sold = 84,000. (5 marks) a. Ignoring the effect of taxes, what is the accounting break-even quantity? (1 mark) b. What is the cash break-even quantity? (1 mark) c. What is the financial break-even quantity? (2 marks) d. If the OCF at 84,000 units is $358,250, what is degree of operating leverage and what does this number tell you? (1 mark)
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