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 $27,200, and the company expects to sell 1,570 per year. The company currently sells 2,070 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,890 units per year. The old board retails for $23,100. Variable costs are 57 percent of sales, depreciation on the equipment to produce the new board will be $1,520,000 per year, and fixed costs are $1,420,000 per year.

If the tax rate is 35 percent, what is the annual OCF for the project?

Explanation / Answer

You know none of of you are right and you get paid for that the real answer is

$27,200 x 1,570 = 42,704,000 x (1 - 0.57) = 18,362,720

2,070 - 1,890 = 180

$23,100 x 180 = 4,158,000 x (1 - 0.57) = 1,787,940

18,362,720 - 1,787,940 = 16,574,780

16,574,780 - 1,520,000 - 1,420,000 = 13,634,780

13,634,780 x (1-0.35) = 8,862,607

8,862,607 + 1,520,000 = 10,382,607

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

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