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Problem:

Management has compiled the following information to determine whether or not this new sealant should be manufactured. Projected fixed costs are $894,080 and the anticipated annual operating cash flow is $254,000. The sealant project has an initial fixed asset requirement of $1,750,000, which would be depreciated straight-line to zero over the 10-year life of the project.

Requirement:

Question: What is the degree of operating leverage for this project?

A. 3.78

B. 3.92

C. 4.08

D. 4.27

E. 4.52

Note: Explain all steps comprehensively.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171920

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