# Consider a project with the following information: Initial fixed asset investment = \$515,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = \$47; variable costs = \$29; fixed costs = \$207,000; quantity sold = 102,000 units; tax rate = 21 percent.  How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)find the change in OCF/Change in Q

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 Consider a project with the following information: Initial fixed asset investment = \$515,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = \$47; variable costs = \$29; fixed costs = \$207,000; quantity sold = 102,000 units; tax rate = 21 percent.

 How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

find the change in OCF/Change in Q

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Step 1

The initial fixed investment cost is \$515,000. So, annual depreciation will be (\$515,000 ÷ 4) = \$128,750.

The operating cashflow can be calculated with the help of below expression:

Step 2

Substitute 102,000 for quantity, \$47 for sales price, \$29 for variable cost, \$207,000 for fixed cost, 21% for tax and \$128,750 for depreciation in the above expression,

Step 3

If quantity sold is increase by 1 unit, th...

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