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Suppose we are evaluating Project X that costs $1,160,000, has a life of 10 years, and has no salvage value. Assume that depreciation is straight-line
Suppose we are evaluating Project X that costs $1,160,000, has a life of 10 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 44,000 units per year. Price per unit is $45, variable cost per unit is $20, and fixed costs are $645,000 per year. The tax rate is 24 percent and we require a return of 13 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within #15 percent. What is the best case OCF in Year 1? $716,780 $947,516 $919,676
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