You are the manager of a project that has an operating leverage rating of 2.8 and a required return of 14 percent. Due to the current state of the economy, he expects sales to decrease by 7 percent next year. What change should you expect in operating cash flows next year given your sales forecast?

The change should you expect in operating cash flows next year would be 19.60%

Explanation:

In order to calculate the change should you expect in operating cash flows next year given your sales forecast we would have to make the following calculation:

change should you expect in operating cash flows=operating leverage rating*percentage of decrease sales next year

change should you expect in operating cash flows=2.8*0.07

change should you expect in operating cash flows=19.60%

The change should you expect in operating cash flows next year would be 19.60%

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