Consider a 5-Year Project with an Initial Fixed Asset Investment

Multiple Choice

Consider a 5-year project with an initial fixed asset investment of $324,000, straight-line depreciation to zero over the project's life, a zero salvage value, a selling price of $34, variable costs of $17, fixed costs of $189,700, a sales quantity of 94,000 units, and a tax rate of 21 percent. What is the sensitivity of OCF to changes in the sales price?

A) $74,260 per $1 of sales
B) $61,600 per $1 of sales
C) $78,700 per $1 of sales
D) $59,470 per $1 of sales
E) $68,850 per $1 of sales