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Sheffield's Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake - Bite for $ 2 0 , then the demand
Sheffield's Home Brew Whiskey management forecasts that if the firm sells each bottle of SnakeBite for $ then the demand
for the product will be bottles per year. Sales will equal only percent of this amount if the price is raised percent.
Sheffield's variable cost per bottle is $ and the total fixed cash cost for the year is $ Depreciation and amortion
charges are $ and the firm has a percent marginal tax rate. Management anticipates an increased working capital
need of $ for the year. What will be the effect of a percent price increase on the firm's FCF for the year?
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At $ per bottle the Sheffield's FCF is $
and at the new price Sheffield's FCF is $
By increasing the price of a bottle by percent, the FCF
by $
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