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 $26,600, and the company expects to sell 1,510 per year. The company currently sells 2,010 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,830 units per year. The old board retails for $22,500. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,460,000 per year, and fixed costs are $1,360,000 per year. Required: 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).) OCF $ I have posted this question twice and the answers were incorrect. Thank you

Explanation / Answer

Old Board Sales= 2010 units @22500 per unit If New Board is introduced Sale of Old Board= 1830 units @ 22500 per unit                                             411,75,000.00 Sale of New Boards= 1510 units @26600 per unit                                             401,66,000.00 Particulars Old Board New Board Total Sales                                             411,75,000.00                           401,66,000.00                   813,41,000.00 Less: Variable Costs @56%                                             230,58,000.00                           224,92,960.00                   455,50,960.00 Contribution                                             181,17,000.00                           176,73,040.00                   357,90,040.00 Less: Fixed Cost                     13,60,000.00 Operating cash flow                   344,30,040.00

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