Question
Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 46,000 units at $18 a unit,
Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 46,000 units at $18 a unit, production costs at 37% of sales price, annual fixed costs for production at $190,000. The company tax rate is 30%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment $1340000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380000. The cost of capital is 10%. What is the annual operating cash flow of the new GPS system?
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