1) The Creamery is analyzing a project with expected sales of 3,800 units, give or take five percent. The expected variable cost per unit is $185, and the expected fixed costs are $364,000. Cost estimates are considered accurate within a plus or minus two-percent range. The depreciation expense is $104,000. The sales price is estimated at $305 per unit, give or take four percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis with fixed costs of $360,000. What's the OCF, given this analysis?

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2) A project will require $498,000 for fixed assets and $58,000 for net working capital. The fixed assets will be depreciated straight-line to a zero book value over the five-year life of the project. At the end of the project, the fixed assets will be worthless. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $875,000 and costs of $640,000. The tax rate is 35 percent, and the required rate of return is 15 percent. What's the amount of the annual operating cash flow?

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Answer rating: 100% (QA)

1 For the first problem well calculate the Operating Cash Flow OCF based on the given information Expected sales 3800 units give or take 5 Expected va... View the full answer