Question: Zuganta Ltd. invests in a project that requires an initial investment of $60,000 that will be fully depreciated straight line over the 4 year project

Zuganta Ltd. invests in a project that requires an initial investment of $60,000 that will be fully depreciated straight line over the 4 year project life. They expect sales of 20,000 units at $8.00/unit; fixed costs of $18,000 per annum; variable costs of $3.00/unit. Depending on the state of the economy unit sales could be 10% higher or lower than forecasted; variable cost per unit and fixed costs could be 5% higher or lower than expected and selling price 20% higher or lower than expected. Assume your tax rate is 40%. What is the annual operating cash flow, under the best-case scenario?

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