Power Saving Programmable Thermostats is analyzing a proposed project. The compa

Question

Power Saving Programmable Thermostats is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $755. What is the operating cash flow based on this analysis?

Explanation / Answer

Operating cash flow can be given as below:-

OCF= [{(755-260)*2100}-589000][1-0.35]+(129000*0.35)

OCF=450500*0.65+45150

OCF=$337975

hus the correct option is:- A= $337975

PLEASE RATE THE ANSWER AS THUMBS UP. THANKS A LOT

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.