Rolston Music company is considering the sale of a new sound board used in recor

Question

Rolston Music company is considering the sale of a new sound board used in recording studios. The new board would sell for $25, 00 and the company expects to sell 1, 470 per year. The company currently sells 1, 970 units of its existing model per year. If new model is introduced sales of the existing model will fail to 1, 790 units per year. The old board retails for $22, 100. Variable costs are 57 percent of sales depreciation on the equipment to produce the new board will be $1, 420, .000 per year and fixed costs are $1, 320, 000 per year. If the tax rate is 35 percent, what is the annual OCF for the project?

Explanation / Answer

Statement showing calculation of OCF

Particulars Amt. Sale of old model(1790x22100) 39559000 Sale of new model(1470x26200) 38514000 Total sales 78073000 Less : Variable cost 44501610 Less: Fixed cost 1320000 CFBT 32251390 Less: Tax 11287987 Add: Tax savings on depreciation 497000 OCF 20466403

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.