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A company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 12,000 units, pm 4 percent. The expected variable
A company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 12,000 units, \pm 4 percent. The expected variable cost per unit is $10, and the expected fixed costs are $40,000. The fixed and variable cost estimates are considered accurate within a \pm 5 percent range. The sales price is estimated at $20 a unit, \pm 5 percent. The project requires an initial investment of $150,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $24,000 at the end of the project. The project requires $30,000 in net working capital for the three years. The discount rate is 11% percent and tax rate is 25 percent. What is the operating cash flow for year 2 under the optimistic case scenario? (Hint: under the optimistic scenario, the number of units sold and price are higher and the costs are lower than expected) $103,040$97,340$91,640$85,940$80,240
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