Question: A company is analyzing a proposed 6-year project using standard sensitivity analysis. The company expects to sell 31,000 units, 4 percent. The expected variable cost
A company is analyzing a proposed 6-year project using standard sensitivity analysis. The company expects to sell 31,000 units, 4 percent. The expected variable cost per unit is $25.60 and the expected fixed costs are $210,000. The fixed and variable cost estimates are considered accurate within a 4 percent range. The sales price is estimated at $44.50 a unit, 4 percent. The project requires an initial investment of $360,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $60,000 at the end of the project. The project requires $65,000 in net working capital up front. The discount rate is 11 percent and tax rate is 30 percent. What is the operating cash flow in year 2 under the optimistic case scenario?
| $268,909.70 | ||
| $317,283.45 | ||
| $366,695.87 | ||
| $335,048.41 | ||
| $291,588.33 |
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