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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%.

  1. 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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