A project with a higher proportion of fixed costs will have cash flows and accounting profits that are more sensitive to changes in revenues than an otherwise identical project with a lower proportion of fixed costs.

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A project with a higher proportion of fixed costs will have a higher breakeven point, meaning it will require a higher level of revenue to cover the fixed costs and start generating profits. Therefore, any increase or decrease in revenue will have a greater impact on the project's cash flows and accounting profits compared to a project with lower fixed costs.

A Project with a Higher Proportion of Fixed Costs Will