1) Winnebagel Corp. currently sells 29,300 motor homes per year at $79,500 each
ID: 2625896 • Letter: 1
Question
1) Winnebagel Corp. currently sells 29,300 motor homes per year at $79,500 each and 8,300 luxury motor coaches per year at $121,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 24,300 of these campers per year at $25,500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 3,900 units per year and reduce the sales of its motor coaches by 980 units per year.
What is the amount to use as the annual sales figure when evaluating this project? (Do not round intermediate calculations.)
$
2) Consider an asset that costs $885,600 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a six-year project; at the end of the project, the asset can be sold for $135,900.(Do not round intermediate calculations.)
If the relevant tax rate is 35 percent, what is the aftertax cash flow from the sale of this asset?
Required:What is the amount to use as the annual sales figure when evaluating this project? (Do not round intermediate calculations.)
Explanation / Answer
(29,300+3,900)*79,500 +(8,300-980)*121,500 +24,300*25,500= 4,148,430,000
135,900- 0.35(135900-885600*3/9)= 135,900 +55,755= 191,655. (tax loss on sale of equipment).
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