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Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 6,900 pairs of sunglasses at a price of $164
Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 6,900 pairs of sunglasses at a price of $164 each and a variable cost of $116 each. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line basis over the 9-year life of the project. Fixed costs are $300,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?
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