Question

Cusic Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $24,200, and the company expects to sell 1,590 per year. The company currently sells 1,940 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,610 units per year. The old board retails for $22,600. Variable costs are 54 percent of sales, depreciation on the equipment to produce the new board will be $1,335,000 per year, and fixed costs are $3,125,000 per year. If the tax rate is 24 percent, what is the annual OCF for the project

Answer 1

Answer:

$31,312,440  

Explanation:

Working for Net Income Calculation is attached in MS Excel File Format with this answer, Please Fins it.

Net Income =  $29,977,440

As we know that the depreciation is a non cash expense, so it will be added back to the net income to calculate the Operating cash flow.

Operating Cash Flow = Net Income + Depreciation

Operating Cash Flow = $29,977,440  + 1,335,000

Operating Cash Flow = $31,312,440  

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