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 1.10 million bottles; a probability of 0.39 that consumers will find the smell acceptable and annual sales will be 222,000 bottles; and a probability of 0.09 that consumers will find the smell unpleasant and annual sales will be only 55,000 bottles. The selling price is $37, and the variable cost is $9 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.17 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.)
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 1.10 million bottles; a probability of 0.39 that consumers will find the smell acceptable and annual sales will be 222,000 bottles; and a probability of 0.09 that consumers will find the smell unpleasant and annual sales will be only 55,000 bottles. The selling price is $37, and the variable cost is $9 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.17 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.)
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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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 1.10 million bottles; a probability of 0.39 that
consumers will find the smell acceptable and annual sales will be 222,000 bottles; and a probability of 0.09 that
consumers will find the smell unpleasant and annual sales will be only 55,000 bottles. The selling price is $37, and the
variable cost is $9 per bottle. Fixed production costs will be $1.08 million per year, and depreciation will be $1.17 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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