NPV.Grady Precision Measurement Tools has forecasted the following sales and cos
ID: 2799395 • Letter: N
Question
NPV.Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales 47,000 units at $17 a unit, production costs at 37% of sales price, annual fixed costs for production at $180,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,400,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 11%.What is the annual operating cash flow of the new GPS system? NPV.Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales 47,000 units at $17 a unit, production costs at 37% of sales price, annual fixed costs for production at $180,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,400,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 11%.
What is the annual operating cash flow of the new GPS system? NPV.Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales 47,000 units at $17 a unit, production costs at 37% of sales price, annual fixed costs for production at $180,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,400,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 11%.
What is the annual operating cash flow of the new GPS system?
Explanation / Answer
Calculation of Annual Operating Cash Flow: Particulars Amount($) Sales 47000*17 $799,000 Less: Variable Costs 799000*37% $295,630 Contribution Margin 799000-295630 $503,370 Less: Fixed Costs $180,000 Operating Profit before tax 503370-180000 $323,370 Less: Taxes (38%) 323370*38% $122,881 Operating Profit after tax 323370-122881 $200,489 Add: Depreciation (1400000-380000)/6 $170,000 Operating Cash Flow 200489+170000 $370,489
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