Problem:
Consider a three-year project with the following information: initial fixed asset investment = $870,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.05; variable costs = $22.55; fixed costs = $210,000; quantity sold = 96,000 units; tax rate = 34 percent.
Required:
Question: How sensitive is OCF to changes in quantity sold?
Note: Show all workings.