Question
The Company is considering a project with estimated annual unit sales of 180,000; price per unit of $42; variable costs per unit of $12; and
The Company is considering a project with estimated annual unit sales of 180,000; price per unit of $42; variable costs per unit of $12; and fixed costs of $380,000. The firm expects that the true values for unit sales, price per unit, variable costs per unit, and fixed costs will be within plus or minus 20% of these estimates. The project requires a fixed asset investment of $2,000,000 that will be depreciated straight-line to zero over the projects 5 year life. The firms discount rate is 10% and the tax rate is 30%. Calculate the worst case OCF?
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