* Most Visted @ Getting Started My USC. Aken-Black. The True Story of Poca DIM 3

ID: 2798445 • Letter: #

Question

* Most Visted @ Getting Started My USC. Aken-Black. The True Story of Poca DIM 363 FINANCE Instructions l help Chapter 9 Homework Save & E Subm Oucsnon 5 (or 6) 10 00 points Problem 9 8 Calculating Project OCF ILO 2] The company currently sels 1,940 units af its exsing model per year if Rolston Musk Company is considering the sale of a new sound board recordin the new modelis introduced, sales of the existing modlel wil l to 1,760 units per yer used in recording sAudios The new board would sell for $25 900 and the company expects to sell 1,440 per year The old board retais for $21,800 Variable costs are 53 percent of sales, depreciation on the equpment to produce the new board will be $1,390,.000 per year, and costs are $1,290,000 per yean If the tax rate is 30 percent, what rs the annual OCE OCF not round i intermediate calculations and round your answer to the nearest whole dollar amount, e.g, 32.) your answer to for the proect?

Explanation / Answer

Sales revenue from new sound board

$ 37,296,000

Less: Decrease sales revenue of existing model

$ 3,924,000

Less: Variable cost

$ 19,766,880

Less: Fixed cost

$ 1,290,000

EBIT

$ 12,315,120

Less: Tax @ 30%

$ 3,694,536

Net Income

$ 8,620,584

Sales revenue from new sound board = $ 25,900 x 1,440 = $ 37,296,000

No. of units decrease in sales of existing model = 1,940 – 1,760 = 180 units

Decrease in sales revenue of existing model = $ 21,800 x 180 = $ 3,924,000

Variable cost = 0.53 x $ 37,296,000 = $ 19,766,880

OCF = EBIT + Depreciation – Taxes

= $ 12,315,120 + $ 1,390,000 - $ 3,694,536

= $ 13,705,120 - $ 3,694,536

= $ 10,010,584