Funzy corp. has decided to sell a new line of TVs. The firm has also spent $2 million in research and development for the new TVs. It is estimated that the new TVs will sell for $650 per unit and have a variable cost of $400 per unit. The firm has spent $450,000 in market research for these new TVs. 

It is concluded in this study that the firm can easily sell 70,000 TVs in each of the following ten years. As part of the research, it was found that the firm is very likely to lose sales of 10,000 units of its existing high-priced TVs. These TVs currently sell for $1200 each and have variable costs of $530. On the positive side, the study also revealed that the firm will increase sales of its cheap TVs by 15,000 units. The cheap TVs sell for $220 and have variable costs of $100 per set. The fixed costs each year will be $9 million. Annual depreciation is $2 million and there are no interests expenses. 

The corporate tax rate is 40%. What is the annual operating cash flow (OCF)?

Answer rating: 100% (QA)

To calculate the annual operating cash flow OCF we need to consider all the relevant cash flows asso... View the full answer