Cost of Souffle Maker $39,000 ($39,000) Economic Life 6 years # of Souffles prod
ID: 2661086 • Letter: C
Question
Cost of Souffle Maker $39,000 ($39,000) Economic Life 6 years # of Souffles produced per year 2,500 Cost to make each Souffle $2 Price of each Souffle $7 Discount Rate 14% Tax Rate 34% Step 1: First calculate the Operating Cash Flow #NAME?The excel forumlation provided is =((B*B?)-(B?*B?))*(1-B?)+B?*(B?/B?) Cost of Souffle Maker $39,000 ($39,000) Economic Life 6 years # of Souffles produced per year 2,500 Cost to make each Souffle $2 Price of each Souffle $7 Discount Rate 14% Tax Rate 34% Step 1: First calculate the Operating Cash Flow #NAME?
The excel forumlation provided is =((B*B?)-(B?*B?))*(1-B?)+B?*(B?/B?)
Explanation / Answer
Operating Cash Flow = EBIT (earnings before interest and taxes) + Depreciation - Taxes
Depreciation = 39,000/6= 6500
EBIT = Revenue - Fixed cost - variable cost = 2,500*7 - 2,500*2 -6500 = 6000
Operating Cash Flow = 6000*(1-34%) + 6500=$10460