A 9-year project is expected to generate annual sales of 8,700 units at a price of $74 per unit and a variable cost of $45 per unit. The equipment necessary for the project will cost $301,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $180,000 per year and the tax rate is 23 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?

A 9-year project is expected to generate annual sales of 8,700 units at a price of $74 per unit and a variable cost of $45 per unit. The equipment necessary for the project will cost $301,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $180,000 per year and the tax rate is 23 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 6PROB

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