Question
LDA's project requires an initial investment of $10,000, straight-line depreciable to zero over 4 years. The discount rate is 10%. The tax rate is 34%.
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LDA's project requires an initial investment of $10,000, straight-line depreciable to zero over 4 years. The discount rate is 10%. The tax rate is 34%. Additional information for variables with forecast error are shown below. Variables can bounce between lower and upper bound independently from each other.
Base Lower Upper Case Bound Bound Unit Sales 3,000 2,750 3,250 Price/unit $14 $13 $16 Variable cost/unit $9 $8 $10 Fixed costs $4,500 $4,000 $5,000
What is the best case OCF for the Project?
$17,234
$10,420
$15,370
$14,842
$16,162
LDA's project requires an initial investment of $10,000, straight-line depreciable to zero over 4 years. The discount rate is 10%. The tax rate is 34%. Additional information for variables with forecast error are shown below. Variables can bounce between lower and upper bound independently from each other.
| Base | Lower | Upper | ||
| Case | Bound | Bound | ||
| Unit Sales | 3,000 | 2,750 | 3,250 | |
| Price/unit | $14 | $13 | $16 | |
| Variable cost/unit | $9 | $8 | $10 | |
| Fixed costs | $4,500 | $4,000 | $5,000 | |
What is the best case OCF for the Project?
| $17,234 | ||
| $10,420 | ||
| $15,370 | ||
| $14,842 | ||
| $16,162 |
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Principles of Managerial Finance
Authors: Chad J. Zutter, Scott B. Smart
15th edition
013447631X, 134476315, 9780134478197 , 978-0134476315
