Problem 9-8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $23, 800, and the company expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

Problem 9-8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $23, 800, and the company expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 8PROB

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