Question
Please show formulas and workings and Present your solution in statement format. Victoria Home Brew forecasts that if it sells each bottle of HBrew for
Please show formulas and workings and Present your solution in statement format.
Victoria Home Brew forecasts that if it sells each bottle of HBrew for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent.
Victorias variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000.
Depreciation and amortisation charges are $20,000, and the company is in the 30 percent tax rate. The company anticipates an increased working capital need of $3,000 for the year.
(a) What will be the effect of a price increase on the companys FCF for the year?
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