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Problem:

Consider a three-year project with the following information: initial fixed asset investment = $694,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $33.95; variable costs = $22.50; fixed costs = $209,500; quantity sold = 95,500 units; tax rate = 40 percent.

Required:

Question 1: What is the OCF at the base-case quantity sold?

Question 2: What is the OCF at 96,500 units sold?

Question 3: How sensitive is OCF to changes in quantity sold?

Note: Please describe comprehensively and provide step by step solution.

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Category:- Basic Finance
Reference No.:- M91148233

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