A B C D E F G H I J K 1 Problem 11.19 Cash Flows from Operations 2 3 4 Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is $30,000; the price is $22,000 per car. Variable costs of production are $10,000 per car. 5 The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan 7 8 6 will decrease Ford's sales of regular sedans by 10,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $50,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? 9 10 What is the incremental annual cash flow from operations? 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Hint: Calculate the incremental annual operating cash flow using the Cash Flow Calculation Template and then do the same by writing a formula. A Hybrid Sedan Sales: Price of Hybrid: Variable Production Costs (Hybrid): A Regular Sedan Sales: Price of Regular Sedan: Variable Production Costs (Sedan): Fixed Costs (Sedan): Fixed Overhead: Depreciation: Marginal Tax Rate: Cash Flow Calculation Template A Revenue - A Operating Expenses = A EBITDA A Depreciation & Amortization A EBIT x (1-Tax Rate) = NOPAT + Depreciation & Amortization = A Cash Flow from Operations A Capital Expenditures A Working Capital A Free Cash Flow A Cash Flow from Operations (formula)