Question
We are evaluating a project that costs $838,491, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over
We are evaluating a project that costs $838,491, has an eight-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 64,998 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $419,314 per year. The tax rate is 35%, and we require a return of 18% on this project.
In percentage terms, what is the sensitivity of OCF to changes in the variable cost per unit projection? (Round answer to 2 decimal places. Do not round intermediate calculations)
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