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We are evaluating a project that costs $680,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $680,000, has a five-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 64,000 units per year. Price per unit is $46, variable cost per unit is $26, and fixed costs are $685,000 per year. The tax rate is 35 percent, and we require a return of 20 percent on this project. A-2) What is the degree of operating leverage at the accounting break-even point?
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