Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis with fixed costs of $590,000. What is the OCF given this analysis?
A)$337,975
B)$285,350
C)$330,500
D)$354,874
E)$414,350

Question

Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis with fixed costs of $590,000. What is the OCF given this analysis?
A)$337,975
B)$285,350 
C)$330,500
D)$354,874
E)$414,350

Quizplus · Accepted Answer

OCF {[(750 - $260) F1F1F1S1F1F1F10 2,100] - $590,000} {1 - 0.35} + ($129,000 F1F1F1S1F1F1F10 0.35) = $330,500

Precise Machinery Is Analyzing a Proposed Project