Question

A project with a life of 7 years is expected to provide annual sales of $350,000...

A project with a life of 7 years is expected to provide annual sales of $350,000 and costs of $245,000. The project will require an investment in equipment of $625,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 35 percent. What is the annual operating cash flow for the best-case scenario?

$106,925

$88,825

$138,175

$60,825

$113,500


Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Best Case Scenario
Sales Increase by 10%
Costs Decrease by 10%
Statement Computing Operating Cash Flows In $
Sales 385000.00 (350000*1.10)
Less Costs 220500.00 (245000*0.90)
Less Depreciation 89285.71 (625000/7)
EBT 75214.29
Less Tax@35% 26325.00
EAT 48889.29
Add Depreciation 89285.71
Operating Cash Flows 138175.00
Hence the Correct answer is C. $138175
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A project with a life of 6 years is expected to provide annual sales of $340,000...
A project with a life of 6 years is expected to provide annual sales of $340,000 and costs of $237,000. The project will require an investment in equipment of $610,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 34 percent. What is the annual operating cash flow for the best-case scenario?
A project with a life of 9 years is expected to provide annual sales of $330,000...
A project with a life of 9 years is expected to provide annual sales of $330,000 and costs of $229,000. The project will require an investment in equipment of $595,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 40 percent. What is the annual operating cash flow for the best-case scenario? Multiple Choice $94,140 $104,894 $120,584 $89,204 $53,504
A 7-year project is expected to provide annual sales of $217,000 with costs of $97,000. The...
A 7-year project is expected to provide annual sales of $217,000 with costs of $97,000. The equipment necessary for the project will cost $355,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 34 percent. What is the annual operating cash flow for the worst-case scenario?
A 7-year project is expected to provide annual sales of $169,000 with costs of $91,000. The...
A 7-year project is expected to provide annual sales of $169,000 with costs of $91,000. The equipment necessary for the project will cost $295,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 34 percent. What is the annual operating cash flow for the worst-case scenario? Multiple Choice $49,689 $32,009 $34,320 $82,969 $48,649
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This...
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This project is estimated to generate sales of $250,000 each year. The annual costs are estimated to be $165,000. At Time 0, Pasha will need to invest $475,000 in new fixed assets. This will be depreciated on a straight-line method over the life of the project with no salvage value. Management has indicated that the sales and costs for this project are accurate within a...
A 9-year project is expected to generate annual sales of 8700 units at a price of...
A 9-year project is expected to generate annual sales of 8700 units at a price of $74 per unit and a variable cost of $45 per unit. The equipment necessary for the project will cost $301,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $180,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?...
Jefferson & Sons is evaluating a project that will increase annual sales by $150,000 and annual...
Jefferson & Sons is evaluating a project that will increase annual sales by $150,000 and annual cash costs by $90,000. The project will initially require $100,000 in fixed assets that will be depreciated straight-line to a zero book value over the 5-year life of the project. The applicable tax rate is 40 percent. What is the operating cash flow for this project? a. $11,220 ( ) b. $29,920 ( ) c. $44,000 ( ) d. $46,480 ( ) e. $46,620
We are evaluating a project that costs $106869, has a seven-year life, and has no salvage...
We are evaluating a project that costs $106869, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 4092 units per year. Price per unit is $55, variable cost per unit is $29, and fixed costs are $82782 per year. The tax rate is 38 percent, and we require a 9 percent return on this project. Suppose the projections given for price, quantity, variable...
We are evaluating a project that costs $744,000, has a six-year life, and has no salvage...
We are evaluating a project that costs $744,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 45,000 units per year. Price per unit is $60, variable cost per unit is $20, and fixed costs are $740,000 per year. The tax rate is 35 percent, and we require a return of 18 percent on this project. Suppose the projections given for price, quantity,...
What is the annual operating cash flow for a 10 year project that has annual sales...
What is the annual operating cash flow for a 10 year project that has annual sales of $650,000, its variable cost are 70% of sales and has annual fixed cost of $130,000. The project requires new equipment at a cost of $50,000 and installation costs of $3,000 and a plant that costs $70,000. Depreciation is under the straight line method and the equipment has an estimated life of 10 years and the plant an estimated life of 30 years. The...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT