Stellar Plastics is analyzing a proposed project. The company expects to sell 11

Question

Stellar Plastics is analyzing a proposed project. The company expects to sell 11,000 units, give or take 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6 percent range. The depreciation expense is $32,000. The tax rate is 34 percent. The sale price is estimated at $16.00 a unit, give or take 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000? $35,000.00 $67,000.00 $55,100.00 $20,100.00 $23,100.00

Explanation / Answer

Stellar Plastics is analyzing a proposed project. The company expects to sell 11,000 units, give or take 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6 percent range. The depreciation expense is $32,000. The tax rate is 34 percent. The sale price is estimated at $16.00 a unit, give or take 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000? $35,000.00

$67,000.00

$55,100.00

$20,100.00

$23,100.00

OCF = [(11,000 ($16.00 $7.00)] $32,000][1- 0.34] +($32,000 0.34) =

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