Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 3 percent. The expected variable cost per unit is $3.20 and the expected fixed costs are $30,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $26,000. The tax rate is 34 percent. The sales price is estimated at $7.50 a unit, plus or minus 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000?
A)$19,580
B)$22,436
C)$27,210
D)$31,460
E)$37,540

Question

Quizplus · Accepted Answer

OCF = [(12,000 F1F1F1S1F1F1F10 ($7.50 - $3.20)] - $31,000][1- 0.34] +($26,000 F1F1F1S1F1F1F10 0.34) = $22,436

Stellar Plastics Is Analyzing a Proposed Project