Steele Insulators Is Analyzing a New Type of Insulation for Interior

Multiple Choice

Steele Insulators is analyzing a new type of insulation for interior walls. The initial fixed asset requirement is $1.62 million, which would be depreciated straight-line to zero over the 7-year life of the project. Projected fixed costs are $287,400 and the anticipated operating cash flow is $136,300. What is the degree of operating leverage for this project?

A) 3.66
B) 1.92
C) 3.11
D) 2.27
E) 2.49