Scenario analysis: Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year. Sales will equal only 90 percent of this amount if the price is raised 10 percent.

Chip’s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are

$20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year.

What will be the effect of a 10 percent price increase on the firm’s FCF for the year?