contestada

Problem 11-13 Operating Cash Flow and Leverage [LO4] A proposed project has fixed costs of $94,000 per year. The operating cash flow at 6,400 units is $88,800. Ignore the effect of taxes. a. What is the degree of operating leverage? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) b. If units sold rise from 6,400 to 6,900, what will be the new operating cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the new degree of operating leverage? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

Respuesta :

Answer:

(a) 2.0586

(b) 103,081.5264

(c) 1.9119

Explanation:

(a) Degree of operating leverage:

[tex]= 1 + \frac{fixed\ costs}{operating\ cash\ flow}[/tex]

[tex]= 1 + \frac{94,000}{88,800}[/tex]

      = 1 + 1.058559  

      = 2.0586

(b)

Percentage change in quantity:

[tex]= \frac{(6,900-6,400)}{6,400}\times 100[/tex]

= 0.078125 or 7.8125%

Operating cash flow at 6,900 units:

Percentage change in OCF = 2.0586 ( 0.07815%)

                                              = 0.160828 or 16.0828

New OCF = 88,800 ( 1.160828)

New OCF = 103,081.5264

(c)

New Degree of operating leverage:

[tex]= 1 + \frac{fixed\ costs}{operating\ cash\ flow}[/tex]

[tex]= 1 + \frac{94,000}{103,081.5264 }[/tex]

      = 1 + 0.9119

      = 1.9119

Otras preguntas