A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.47 that consumers will love Happy Forever, and in this case, annual sales will be 1.08 million bottles; a probability of 0.39 that consumers will find the smell acceptable and annual sales will be 220,000 bottles; and a probability of 0.14 that consumers will find the smell unpleasant and annual sales will be only 50,000 bottles. The selling price is $39, and the variable cost is $10 per bottle. Fixed production costs will be $1.01 million per year, and depreciation will be $1.18 million. Assume that the marginal tax rate is 27 percent. What are the expected annual incremental after-tax free cash flows from the new fragrance? (Round answer to O decimal places, e.g. 5,275.) Annual incremental cash flows $
A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.47 that consumers will love Happy Forever, and in this case, annual sales will be 1.08 million bottles; a probability of 0.39 that consumers will find the smell acceptable and annual sales will be 220,000 bottles; and a probability of 0.14 that consumers will find the smell unpleasant and annual sales will be only 50,000 bottles. The selling price is $39, and the variable cost is $10 per bottle. Fixed production costs will be $1.01 million per year, and depreciation will be $1.18 million. Assume that the marginal tax rate is 27 percent. What are the expected annual incremental after-tax free cash flows from the new fragrance? (Round answer to O decimal places, e.g. 5,275.) Annual incremental cash flows $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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am. 133.
Transcribed Image Text:A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.47 that consumers will love
Happy Forever, and in this case, annual sales will be 1.08 million bottles; a probability of 0.39 that consumers will find the smell
acceptable and annual sales will be 220,000 bottles; and a probability of 0.14 that consumers will find the smell unpleasant and annual
sales will be only 50,000 bottles. The selling price is $39, and the variable cost is $10 per bottle. Fixed production costs will be $1.01
million per year, and depreciation will be $1.18 million. Assume that the marginal tax rate is 27 percent. What are the expected annual
incremental after-tax free cash flows from the new fragrance? (Round answer to O decimal places, e.g. 5,275.)
Annual incremental cash flows
$
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