A proposed project has fixed costs of $94,000 per year. The operating cash flow at 6,400 units is $88,800. a. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) b. If units sold rise from 6,400 to 6,900, what will be the new operating cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) c. What is the new degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.)
A proposed project has fixed costs of $94,000 per year. The operating cash flow at 6,400 units is $88,800. a. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) b. If units sold rise from 6,400 to 6,900, what will be the new operating cash flow? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) c. What is the new degree of operating leverage? (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.)
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 4EA: Assume a company is going to make an investment of $450,000 in a machine and the following are the...
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Transcribed Image Text:A proposed project has fixed costs of $94,000 per year. The operating cash flow at 6,400 units
is $88,800.
a. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not round
intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.)
b. If units sold rise from 6,400 to 6,900, what will be the new operating cash flow? (Do not round
intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
c. What is the new degree of operating leverage? (Do not round intermediate calculations. Round
your answer to 4 decimal places, e.g., 32.1616.)
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