A Firm Is Reviewing a Project That Has Fixed Costs

Multiple Choice

A firm is reviewing a project that has fixed costs of $123,500, variable costs of $189,700, sales of $427,600, and a 34% marginal tax rate. The project has no initial cash requirements. What is the degree of operating leverage for this project?

A) .61
B) 1.22
C) 1.61
D) 1.64
E) 2.64