Rock Haven has a proposed project that will generate sales of 2,040 units annual
ID: 2809259 • Letter: R
Question
Rock Haven has a proposed project that will generate sales of 2,040 units annually at a selling price of $44 each. The fixed costs are $23,900 and the variable costs per unit are $14.75. The project requires $41,200 of fixed assets that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. The salvage value of the fixed assets is $11,300 and the tax rate is 35 percent. What is the operating cash flow?
Multiple Choice
$19,646
$31,182
$26,856
$16,125
$37,671
Explanation / Answer
Annual depreciation=(Cost-Value at end of year 4)/Useful Life
=(41200/4)=$10300
Sales(2040*44) 89760 Less:Variable cost(2040*14.75) $30090 Less:fixed cost $23900 Less:depreciation $10300 Earnings before taxes $25470 Less:taxes@35% $8914.5 Net income $16,555.5 Add:depreciation $10300 Operating cash flow $26856.(Approx).Related Questions
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