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A company is analyzing a proposed 6-year project using standard sensitivity analysis. The company expects to sell 33,000 units, 4 percent. The expected variable cost
A company is analyzing a proposed 6-year project using standard sensitivity analysis. The company expects to sell 33,000 units, 4 percent. The expected variable cost per unit is $22.50 and the expected fixed costs are $240,000. The fixed and variable cost estimates are considered accurate within a 4 percent range. The sales price is estimated at $48 a unit, 4 percent. The project requires an initial investment of $360,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $60,000 at the end of the project. The project requires $65,000 in net working capital up front. The discount rate is 11 percent and tax rate is 25 percent. What is the operating cash flow in year 2 under the optimistic case scenario? (Hint: under the optimistic scenario, sales are highest and costs are lowest) $584,787.65 $571,156.80 $557,525.95 $543,895.10 $530,264.25
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