Consider a Three-Year Project with the Following Information: Initial Fixed

question 66

Multiple Choice

Consider a three-year project with the following information: initial fixed asset investment = $347,600; straight-line depreciation to zero over the three-year life; zero salvage value; price per unit = $49.99; variable costs per unit = $30.82; fixed costs per year = $187,000; quantity sold per year = 65,500 units; tax rate = 35 percent.How sensitive is OCF to an increase of one unit in the quantity sold?

• A)$12.46
• B)$11.67
• C)$8.67
• D)$9.08
• E)$13.40

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Definitions:

Mixed Numbers

A combination of a whole number and a fraction used to represent quantities that are greater than whole numbers but less than the next whole number.

Lowest Terms

The simplest form of a fraction, where the numerator and denominator are reduced to their smallest values without changing the value of the fraction.

Fractions

Numerical quantities that represent a part of a whole, typically written with a numerator divided by a denominator.

Mixed Numbers

A number consisting of an integer and a fraction, used to represent quantities greater than a whole but less than two wholes.