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This same question was posted and I reposted since the answer on Chegg is not correct. Please provide correct answer to the above questions. hope that helps.

Tons 25,000

If we consider the effect of taxes, then the degree of operating leverage can be written as:

DOL = 1 + [FC (1 TC) TC D]/OCF

Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $4,900,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,175,000 and that variable costs should be $220 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $550,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $326 per ton. The engineering department estimates you will need an initial net working capital investment of $470,000. You require a return of 9 percent and face a tax rate of 21.

a.	What is the percentage change in OCF if the units sold changes to 26,000? (Do not round intermediate calculations and enter your answer as a percent rounded to 4 decimal places, e.g., 32.1616.)
b.	What is the DOL at the base-case level of output? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

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Question 25 of 25 Total25 of 25

automobile production. You will need an initial $4,900,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,175,000 and that variable costs should be $220 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $550,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $326 per ton. The engineering department estimates you will need an initial net working capital investment of $470,000. You require a return of 9 percent and face a tax rate of 21 . a. What is the percentage change in OCF if the units sold changes to 26,000 ? (Do not round intermediate calculations and enter your answer as a percent rounded to 4 decimal places, e.g., 32.1616.) b. What is the DOL at the base-case level of output? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Answer is complete but not entirely correct

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