A project has projected sales of 25,600 units with a selling price of $4.95 each. Annual fixed costs are $31,000 with variable costs of $2.18 per unit. The project has a three-year life and requires an initial investment of $62,900 for equipment. The equipment will be depreciated straight-line to zero over three years. The sales price has a plus-minus range of 10% while the cost estimates are expected to vary within a 5% range. The quantity has a plus-minus range of 8%. The tax rate is 34%. Under the best-case scenario, what is the operating cash flow?
A) $22,268
B) $28,292
C) $42,867
D) $43,235
E) $49,259

Question

Quizplus · Accepted Answer

Under the best-case scenario, sales price, quantity, and costs are at their most favorable values. Calculate the revenue, subtract variable and fixed costs, and add back depreciation to find the operating cash flow.

A Project Has Projected Sales of 25,600 Units with a Selling