Question

Consider a four-year project with the following information: initial fixed asset investment = $480,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $32; variable costs = $22; fixed costs = $170,000; quantity sold = 78,000 units; tax rate = 32 percent. How sensitive is OCF to changes in quantity sold? (Round your answer to 2 decimal places. (e.g., 32.16)) ΔOCF/ΔQ $

Answer 1

Step-by-step explanation:

This is a question under Sensitivity analysis (which is a technique for forecasting the result of a decision if a condition turns out to be different compared to the key forecasts. It assists in evaluating the risk level of a strategy. It is also used in identifying how reliant the output is on a specific input value.) and the diagram explaning the step by step solution can be seen in the attached image below.