Consider a 5-Year Project with an Initial Fixed Asset Investment

question 54

Multiple Choice

Consider a 5-year project with an initial fixed asset investment of $324,000, straight-line depreciation to zero over the project's life, a zero salvage value, a selling price of $34, variable costs of $17, fixed costs of $189,700, a sales quantity of 94,000 units, and a tax rate of 21 percent. What is the sensitivity of OCF to changes in the sales price?

• A) $74,260 per $1 of sales
• B) $61,600 per $1 of sales
• C) $78,700 per $1 of sales
• D) $59,470 per $1 of sales
• E) $68,850 per $1 of sales

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Definitions:

Stereotyping

The act of assigning oversimplified or generalized traits, behaviors, or beliefs to a particular group of people without acknowledging individual variation.

Case Study

A research method that involves an in-depth analysis of a single individual, event, or group to explore causation in order to find underlying principles.

Heating System

A mechanism in buildings used to maintain a comfortable temperature by generating and distributing heat.

Qualities

Distinctive characteristics or attributes of a person or thing that define their nature or behavior.