You are the CFO of Boss Enterprises. You are considering a four-year project that requires an initial investment of $525,000 in a machinery that will be fully deprecated in a straight line over the four years. The machinery has no salvage value. You believe that you can sell 82,000 units at a price of $45 per unit. The units have a variable cost of $30 and fixed costs of $220,000 annually. The tax rate of Boss is 23% and your cost of capital is 8%. The CEO is concerned with the Sales departments projections and would like to know how sensitive Operating Cash Flow is to sales.

You are the CFO of Boss Enterprises. You are considering a four-year project that requires an initial investment of $525,000 in a machinery that will be fully deprecated in a straight line over the four years. The machinery has no salvage value. You believe that you can sell 82,000 units at a price of $45 per unit. The units have a variable cost of $30 and fixed costs of $220,000 annually. The tax rate of Boss is 23% and your cost of capital is 8%. The CEO is concerned with the Sales departments projections and would like to know how sensitive Operating Cash Flow is to sales.