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

question 79

Multiple Choice

Consider a three-year project with the following information: initial fixed asset investment = $770,000; straight-line depreciation to zero over the three-year life; zero salvage value; price = $34.99; variable costs = $23.16; fixed costs = $245,000; quantity sold = 94,500 units; tax rate = 40 percent.How sensitive is OCF to an increase of one unit in the quantity sold?

• A)$7.10
• B)$7.73
• C)$8.67
• D)$9.97
• E)$11.83

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Definitions:

Semiannual Interest

Interest calculated and disbursed semi-annually.

Bonds

Fixed income investments representing loans made by an investor to a borrower, typically corporate or governmental, which are expected to be paid back with interest.

Financial Treatment

The method applied in accounting and finance to process, present, or manage financial transactions and their impact on financial statements.

Investor Ownership

A form of ownership where investors own shares or stakes in a company, giving them certain rights and potentially a share in the profit.