Aproject has an estimated sales price of $71 per unit, variable costs of $44.03 per unit, fixed costs of $57,000, a required return of 14 percent, an initial investment of $79,500, no salvage value, and a life of four years. ignore taxes. what is the degree of operating leverage at the financial break-even level of output?

3.09

Explanation:

Given that,

Estimated sales price = $71 per unit

Variable costs = $44.03 per unit

Fixed costs = $57,000

Required return(r) = 14 percent

Initial investment = $79,500

No. of years(n) = 4

Financial break even level of output implies that net present value equals zero and initial cost is equal to the present value of the operating cash flow.

79,500 = OCF(2.9114)

OCF = $27,306.45

                                                             = 1 + 2.0874

                                                             = 3.0874

                                                              = 3.09

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explanation: