Rolston Music Company is considering the sale of a new sound board used in recor
ID: 2718616 • Letter: R
Question
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $25,600, and the company expects to sell 1,410 per year. The company currently sells 1,910 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,730 units per year. The old board retails for $21,500. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,360,000 per year, and fixed costs are $1,260,000 per year.
If the tax rate is 40 percent, what is the annual OCF for the project? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount (e.g., 1,234,567).)
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $25,600, and the company expects to sell 1,410 per year. The company currently sells 1,910 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,730 units per year. The old board retails for $21,500. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,360,000 per year, and fixed costs are $1,260,000 per year.
Explanation / Answer
Statement showing calculation of operating Cash flows
Particulars Amount Sales from new model (1410*25600) $36096000 sales from old model (1730*21500) $37195000 Total sales $73291000 Less: Variable cost (56% of sales) $41042960 Less: Fixed cost $1260000 Operating Cash flows $30988040Related Questions
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