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problem: You are considering a new product launch. The project will cost dollar 870,000, have a four year life, and have no salvage value; depreciation is straight line to zero. Sales & projected at 210 units per year; value per unit will be dollar 20,000. Variable cost per unit will be dollar 16,000, & fixed costs will be dollar 348,000 per year. The required return on the project is 15%, & the relevant tax rate is 36%.

[A] The accounting break-even level of output for this project is _______ units. [Give your answer to the nearest whole number] 

[B] The degree of operating leverage at the accounting break-even point is ______. [Round your answer to two decimal places] 

[C] Thus, for every one percent increase in unit sales, OCF will change by ______ percent. (Do not include the % sign. [Give your answer to two decimal places]

Basic Finance, Finance

  • Category:- Basic Finance
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