Rolston Music Company is considering the sale of a new sound board used in recor

Question

Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $26,400, and the company expects to sell 1,490 per year. The company currently sells 1,990 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,810 units per year. The old board retails for $22,300. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,440,000 per year, and fixed costs are $1,340,000 per year.

If the tax rate is 30 percent, what is the annual OCF for the project? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount (e.g., 1,234,567).)

**Show all work**

Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $26,400, and the company expects to sell 1,490 per year. The company currently sells 1,990 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,810 units per year. The old board retails for $22,300. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,440,000 per year, and fixed costs are $1,340,000 per year.

Explanation / Answer

Ans) Cash flow from Operating activites Amount Cash flow from customer Total Sales $ 79,699,000 Cash payment Variable Cost new brand Sales $(42,240,470) Fixed Cost $ (1,340,000) Income Tax $(10,403,559) Net cash flow from operating activity $ 25,714,971 OCF $ 25,714,971 WN-1 Unit Price Units Total New Brand Sales $     26,400 1490 $     39,336,000 Old Sales $     22,300 1810 $     40,363,000 Total Sales $     79,699,000 Variable Cost new brand Sales 53% $ (42,240,470.0) Contribution per unit $     37,458,530 Depreciation $       1,440,000 Fixed Cost $       1,340,000 Fixed Cost and Depreciation $       2,780,000 Net Profit before tax $     34,678,530 Tax 30% $    (10,403,559) Net profit after tax $     24,274,971

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

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