P10-2 Relevant Cash Flows [LO1]

Winnebagel Corp. currently sells 25,200 motor homes per year at $37,800 each, and 10,080 luxury motor coaches per year at $71,400 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 15,960 of these campers per year at $10,080 each. An independent consultant has determined that if the company introduces the new campers, it should boost the sales of its existing motor homes by 3,780 units per year, and reduce the sales of its motor coaches by 756 units per year.

What is the amount to use as the annual sales figure when evaluating this project?

• $262,271,520

• $249,782,400

• $357,739,200

• $160,876,800

P10-4 Calculating OCF [LO1]

Consider the following income statement:

Sales	$ 711,672
Costs	463,008
Depreciation	105,300
Taxes	23 %

Calculate the EBIT

Calculate the net income.

Calculate the OCF.

What is the depreciation tax shield?

P10-7 Calculating Salvage Value [LO1]

Consider an asset that costs $264,000 and is depreciated straight-line to zero over its 12-year tax life. The asset is to be used in a 7-year project; at the end of the project, the asset can be sold for $33,000.

If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset?

• $25,410.00

• $50,710.00

• $53,245.50

• $48,174.50

• $344,202.00