Rolston Music Company is considering the sale of a new sound board used in recor
ID: 2767924 • 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
New Board Old Board Total Sale =25600*1410 =21500*1730 36096000 37195000 73291000.00 Cost 56% 20213760 20829200 41042960.00 Depreciation 1360000.00 Fixed Cost 260000.00 Profit 30628040.00 Tax@40% 12251216.00 Profit After Tax 18376824.00 Cash Profit 19736824.00 Annual Operationg Cash Flow of the Project is 19736824.00
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