Consider a three-year project with the following information: initial fixed asse
ID: 2640393 • Letter: C
Question
Consider a three-year project with the following information: initial fixed asset investment = $682,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $33.35; variable costs = $22.20; fixed costs = $206,500; quantity sold = 92,500 units; tax rate = 40 percent.
What is the OCF at the base-case quantity sold? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).)
What is the OCF at 93,500 units sold? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).)
How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations. Round your answer as directed but do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Consider a three-year project with the following information: initial fixed asset investment = $682,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $33.35; variable costs = $22.20; fixed costs = $206,500; quantity sold = 92,500 units; tax rate = 40 percent.
Explanation / Answer
Statement of Computation of Output Cash Flow on First year Initial Fixed Asset Investment $ 6,82,000.00 $ 6,82,000.00 Straight line Depriciation on Zero Salvage Value Per Year- $682000/4 $ 1,70,500.00 Fixed Cost Per Year $ 2,06,500.00 Total Expenses per year $ 3,77,000.00 Tax Saving on Total Expenses @40%*$377000 $ 1,50,800.00 $ 1,50,800.00 On Unit 92500 On Unit 93500 Selling Price/Value 92500*33.35,93500*33.35 $ 30,84,875.00 $ 31,18,225.00 Varible Cost 92500*22.20 $ 20,53,500.00 $ 20,75,700.00 Contribution $ 10,31,375.00 $ 10,42,525.00 Depriciation-$170500 Fixed Cost-$206500 Total of Dep/Fixed cost $ 3,77,000.00 $ 3,77,000.00 Profit Before Tax $ 6,54,375.00 $ 6,65,525.00 Tax @ 40% on profit before tax $ 2,61,750.00 $ 2,66,210.00 Profit After Tax $ 3,92,625.00 $ 3,99,315.00 Output Cash Flow on unit sale 92500,93500 $ 1,38,575.00 $ 1,31,885.00 Difference on 92500 units and 93500 units output cash flow on first year there cash saving year on cost on 93500units $ 6,690.00