If we conslder the effect of taxes, then the degree of operating leverage can be written as DOL = 1+ [FC x (1 – Td-TC D]/OCF Consider a project to supply Detrolt with 27,000 tons of machine screws annually for automobile production. You will need an Initlal $4,600,000 Investment In threading equipment to get the project started, the project will last for 5 years. The accounting department estimates that annual fixed costs wll be $1,100,000 and that varlable costs should be $205 per ton; accounting will depreclate the Initlal fixed asset Investment stralght-line to zero over the 5-year project life. It also estimates a salvage value of $475,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $308 per ton. The engineering department estimates you will need an Initlal net working capital Investment of $440,000. You requlre a return of 12 percent and face a tax rate of 23.