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 $26,500, and the company expects to sell 1,500 per year. The company currently sells 2,000 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,820 units per year. The old board retails for $22,400. Variable costs are 55 percent of sales, depreciation on the equipment to produce the new board will be $1,450,000 per year, and fixed costs are $1,350,000 per year. Required: If the tax rate is 38 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).)

Explanation / Answer

Additional margin from new sound board (26500*45%)*1500 17887500 Loss of old model magin (22400*45%)*(2000-1820) -1814400 Tax saving on depreciation 1450000*38% 551000 Fixed cost -1350000 OCF 15274100

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

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