What is the degree of operating leverage at the accounting

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Reference no: EM132812476

Matthew is evaluating a project that require an investment costs of $888,000, has a 6-year life and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $47, variable cost per unit is $23, and fixed costs are $850,000 per year. The tax rate is 37%, and this project risk level require 18% return.

Problem a. Calculate the scenario analysis values +/- 20% for worst and best case!

Problem b. Calculate accounting break even point for base case, worst case and best case! (hints: depreciation cost doesn't change on every case).

Problem c. What is the degree of operating leverage (DOL) at the accounting break-even point?

Problem d. What is the Cash break-even of that project?

Problem e. What is the Financial break-even of that Project?

Reference no: EM132812476

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