Stellar Plastics is analyzing a proposed project.The company expects to sell 12,000 units,plus or minus 5 percent.The expected variable cost per unit is $3.20 and the expected fixed costs are $30,000.The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range.The depreciation expense is $24,000.The tax rate is 34 percent.The sales price is estimated at $7.50 a unit,plus or minus 4 percent.What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000?
A)$19,580
B)$21,756
C)$27,210
D)$31,460
E)$37,540

Question

Quizplus · Accepted Answer

OCF = [(12,000 × ($7.50 - $3.20)] - $31,000][1 - 0.34] + ($24,000 × 0.34) = $21,756

Stellar Plastics Is Analyzing a Proposed Project