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Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?   Multiple Choice   $3,159   $3,510   −$4,266   −$3,159   −$3,900

Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?   Multiple Choice   $3,159   $3,510   −$4,266   −$3,159   −$3,900

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
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Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

 

Multiple Choice
  •  

    $3,159

  •  

    $3,510

  •  

    −$4,266

  •  

    −$3,159

  •  

    −$3,900

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