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A project currently generates sales of $11 million, variable costs equal 50% of sales, and fixed...

A project currently generates sales of $11 million, variable costs equal 50% of sales, and fixed costs are $2.2 million. The firm’s tax rate is 30%. Assume all sales and expenses are cash items.

a. What are the effects on cash flow, if sales increase from $11 million to $12.1 million?

b. What are the effects on cash flow, if variable costs increase to 55% of sales?

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