Wilson’s Market is reviewing a project with sales of 6,200 units plus or minus 2

Question

Wilson’s Market is reviewing a project with sales of 6,200 units plus or minus 2 percent at a sales price of $29 plus or minus 1 percent per unit. The expected variable cost per unit is $11 plus or minus 3 percent and the expected fixed costs are $87,000plus or minus 1 percent. The depreciation expense is $68,000 and the tax rate is 35 percent. What is the net income under the worst-case scenario?

Wilson’s Market is reviewing a project with sales of 6,200 units plus or minus 2 percent at a sales price of $29 plus or minus 1 percent per unit. The expected variable cost per unit is $11 plus or minus 3 percent and the expected fixed costs are $87,000plus or minus 1 percent. The depreciation expense is $68,000 and the tax rate is 35 percent. What is the net income under the worst-case scenario?

Explanation / Answer

Sales revenue $ 174,441.96 6200*0.98*29*0.99 Less: Variable costs $   68,841.08 6200*0.98*11*1.03 Fixed costs $   87,870.00 87000*1.01 Depreciation $   68,000.00 Pre-tax income $ -50,269.12 Add: Tax saving on loss $ -17,594.19 Net income $ -32,674.93

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