A.

A project with a life of 7 years is expected to provide annual sales of $310,000 and costs of $213,000. The project will require an investment in equipment of $565,000, 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 34 percent. What is the annual operating cash flow for the best-case scenario?

B.

Stellar Plastics is analyzing a proposed project with annual depreciation of $28,750 and a tax rate of 23 percent. The company expects to sell 16,500 units, 3 percent. The expected variable cost per unit is $1.87, 1 percent, and the expected fixed costs are $24,900, 1 percent. The sales price is estimated at $7.99 a unit, 2 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $26,000?