Question: Haverhill, Inc. is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 10,000 units, 4 percent. The expected variable cost
Haverhill, Inc. is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 10,000 units, 4 percent. The expected variable cost per unit is $6 and the expected fixed costs are $32,000. The fixed and variable cost estimates are considered accurate within a 5 percent range. The sales price is estimated at $15 a unit, 6 percent. The project requires an initial investment of $144,000 for equipment that will be depreciated using the straight-line method to zero over the project's life. The equipment can be sold for $25,000 at the end of the project. The project requires $13,500 in net working capital for the three years. The discount rate is 14 percent and tax rate is 34 percent. What is the operating cash flow in year 2 under the optimistic case scenario?
| $74,865.47 | ||
| $70,436.12 | ||
| $66,268.80 | ||
| $62,211.88 | ||
| $59,605.34 |
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