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 salvage value of zero, 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?

Assume an average selling price of $547 per unit, a variable cost per unit of $339, a monthly interest rate of 1.1 percent, and a default rate of 3.1 percent. What is the NPV of extending credit for 30 days to all who are expected to become repeat customers?

Character, Incorporated, is analyzing a proposed project that is expected to have sales of 2,450 units, ±8 percent. The expected variable cost per unit is $246 and the expected fixed costs are $309,000. Cost estimates are considered accurate within a ±3 percent range. The depreciation expense is $106,000. The sales price is estimated at $599 per unit, ±2 percent. What is the amount of the total costs per unit under the worst-case scenario?

The Cycle Shoppe has decided to offer credit to its customers during the spring selling season. Sales are expected to be 64 bikes with an average cost of $329 each. Four percent of customers are expected to default. To help identify those individuals, the shop is considering subscribing to a credit agency. The initial charge for their services is $250 with an additional charge of $7.50 per individual report. What is the amount of the net savings from subscribing to the credit agency?

CJ Stores has current cash-only sales of 218 units per month at a price of $236.55 per unit. If it switches to a net 30 credit policy, the credit sales price will be $249 while the cash price will remain at $236.55. The switch is not expected to affect the sales quantity but a 3 percent default rate is expected. The monthly interest rate is 1.4 percent. What is the net present value of the proposed credit policy switch?

Which one of the following characteristics best describes a project that has a low degree of operating leverage?

Alcid Manufacturing is analyzing a project with anticipated sales of 8,400 units, ±2 percent. The variable cost per unit is $72, ±2 percent, and the expected fixed costs are $243,000, ±1 percent. The sales price is estimated at $119 per unit, ±3 percent. The depreciation expense is $34,200 and the tax rate is 21 percent. What is the earnings before interest and taxes under the base-case scenario?

Which one of the following is most indicative of a totally efficient stock market?

Thornton Homes has multiple divisions which operate as separate lines of business and face risks unique to those lines. The firm uses its overall WACC as the discount rate to evaluate all proposed projects. Accordingly, each division within the firm will tend to:

The primary purpose of Blume’s formula is to: