Stellar Plastics is analyzing a proposed project. The company expects to sell 12

Question

Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4 percent. The expected variable cost per unit is $6.00 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $31,000. The tax rate is 34 percent. The sale price is estimated at $15.00 a unit, give or take 5 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000?

45000

25700

29700

76000

60700

Please show math part

Explanation / Answer

ans is $60,700

Statement showing computation of cash flows after tax Particulars Amount Sale price per unit                15.00 Variable cost per unit                (6.00) Contribuion cost per unit (SP-VC)                  9.00 No of units sold        12,000.00 Total contribution(12,000*9)     108,000.00 Fixed costs     (32,000.00) Depreciation     (31,000.00) Income before tax (Cont - Fixed costs - Depreciation)        45,000.00 Tax @.34     (15,300.00) Income after tax        29,700.00 Add : Depreciation        31,000.00 Cash flows after tax        60,700.00

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