Orange Electronics projects sales of its new O-Phones for next year at 10,000 un

Question

Orange Electronics projects sales of its new O-Phones for next year at 10,000 units priced at $150 each. The variable costs of an O-Phone are expected to be $75. Fixed cash costs are expected to be $150,000 and depreciation $100,000. The tax rate is 40%. Orange believes that any of its forecasts including fixed costs, but not depreciation or the tax rate which are known for certain, could be high or low by as much as 10%.
What is the expected net operating profit after tax (NOPAT) for the worst case scenario?
a. $300,000
b. $223,500
c. $174,000
d. $124,500

Explanation / Answer

a. $300,000

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