Consider the following project which costs $2,000 with a salvage value of zero in 4 years. The project will produce a new widget which will be sold for $135 and have variable costs of $95 per unit. The company has fixed costs of $3,000 and a required return on projects of 14.5%. If the company sells 200 units, what is the firm’s degree of leverage?
a. 2.4
b. 1.1
c. 2.9
d. 1.6
e. 1.9