No comment want answer A proposed project has fixed costs of $94,000 per year. The operating cash flow at 6,400 unitsis $88,800.a. Ignoring the effect of taxes, what is the degree of operating leverage? (Do not roundintermediate 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 roundintermediate 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. Roundyour answer to 4 decimal places, e.g., 32.1616.)

Let's break down each part of the problem step by step.a) Degree of Operating Leverage (DOL) at…

Answered: A proposed project has fixed costs of…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

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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A project has the following estimated data: Price = $56 per unit; variable costs = $35 per unit; fixed costs = $18,500; required return = 8 percent; initial investment = $45,000; life = five years. a. Ignoring the effect of taxes, what is the accounting break-even quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the cash break-even quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the financial break-even quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the degree of operating leverage at the financial break-even level of output? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a. Accounting break-even quantity b. Cash break-even quantity c. Financial break-even quantity d. DOL
You are analyzing a project and have developed the following estimates: unit sales = 2,150, price per unit = $84, variable cost per unit = $57, fixed costs per year = $13,900. The depreciation is $8,300 a year and the tax rate is 35 percent. What effect would an increase of $1 in the selling price have on the operating cash flow?
A project has fixed costs of $2,100 per year, depreciation charges of $600 a year, annual revenue of $10,800, and variable costs equal to two-thirds of revenues. a. If sales increase by 20%, what will be the percentage increase in pretax profits? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) What is the Pretax profits increase (%)? b. What is the degree of operating leverage of this project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is the degree of operation leverage?
a project fixed cost of $55,000 per year. The operating cash flow at 7,550 units is $56,900. Ignore taxes. what will be the new degree of operating leverage if the number of units sold rises to 9,445?
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You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
A project has fixed costs of $1,300 per year, depreciation charges of $500 a year, annual revenue of $8,100, variable costs equal to two-thirds of revenues and the tax rate is 20%. a. If sales increase by 10%, what will be the increase in pretax profits? Increase in pretax profits % b. What is the degree of operating leverage of this project? (Round your answer to 1 decimal place.) Degree of operating leverage times
Assume a company is going to make an investment of $450,000 in a machine and the following are the cash flows that two different products would bring in years one through four. Which of the two options would you choose based on the payback method?
Coore Manufacturing has the following two possible projects. The required return is 10 percent. Project Y -$ 27,900 13,900 Project Z -$ 59,000 17,500 12,300 30,000 14,700 10,300 Year 0 1 2 3 4 15,500 28,000 a. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 3- b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 3. c. Which, if either, of the projects should the company accept? a. Project Y Project Z b. Project Y Project Z c. Accept project
A business is considering a project which will cost them initially OMR 20,000. The sales expected for the two-year duration is OMR 20,000 per year. The variable costs are OMR 2,000 per year. Cost of capital is 10%. 1. Calculate the sensitivity of the project NPV to change in initial investment? 2. Calculate the sensitivity of the project NPV to change in expected sales?
A) What is the IRR for Project A and B? B) if required return is 8%, what is the NPV of project A and project B? C) at what discount rate would the company be indifferent between these 2 project?

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