You Are Analyzing a Project and Have Developed the Following

question 48

Multiple Choice

You are analyzing a project and have developed the following estimates: unit sales = 2,600, price per unit = $56, variable cost per unit = $39, fixed costs = $24,700. The depreciation is $15,800 a year and the tax rate is 33 percent. What effect would a decrease of $1 in the variable cost per unit have on the operating cash flow?

• A) -$2,600
• B) -$1,742
• C) -$823
• D) $1,742
• E) $2,600

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Definitions:

Long-run Changes

Transformations or trends that occur over a significant period, affecting economic structures, demographic patterns, and technological advancements.

Potential GDP

An estimate of the maximum level of economic activity an economy can sustain over a period without leading to inflation.

High Unemployment

High unemployment refers to a condition where a significant portion of the workforce is without jobs, leading to economic and social challenges.

Credible Policy

A policy considered by participants in the economy to be likely implemented and maintained over time, thereby influencing their economic decisions.