A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.52 that consumers will love Happy Forever, and in this case, annual sales will be 1.02 million bottles; a probability of 0.37 that consumers will find the smell acceptable and annual sales will be 228,000 bottles; and a probability of 0.11 that consumers will find the smell unpleasant and annual sales will be only 50,000 bottles. The selling price is $36, and the variable cost is $11 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.15 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
A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.52 that consumers will love Happy Forever, and in this case, annual sales will be 1.02 million bottles; a probability of 0.37 that consumers will find the smell acceptable and annual sales will be 228,000 bottles; and a probability of 0.11 that consumers will find the smell unpleasant and annual sales will be only 50,000 bottles. The selling price is $36, and the variable cost is $11 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.15 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
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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Transcribed Image Text:A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.52 that consumers will love Happy Forever, and in this case, annual sales will be 1.02
million bottles; a probability of 0.37 that consumers will find the smell acceptable and annual sales will be 228,000 bottles; and a probability of 0.11 that consumers will find the smell unpleasant and
annual sales will be only 50,000 bottles. The selling price is $36, and the variable cost is $11 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.15 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
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