Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expectedannual unit sales of the hybrid cars is 26,000; the price is $21,000 per car. Variable costs of production are $11,000 per car. The fixedoverhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford'ssales of regular sedans b 9,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, andfixed costs of $250,000 per year. Depreciation costs of the production plant are $49,000 per year. The marginal tax rate is 40 percent.What is the incremental annual cash flow from operations?Incremental annual cash flow from operationseTextbook and Media$

with the introduction of new technology. If new technology creates new sales but also causes a…

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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

Problem 1PS

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Concept explainers

Cash Flow Statement Analysis

A company's cash flow is the movement of its cash inflows and cash outflows. A cash flow statement is prepared to determine changes in an organization's cash position. A cash flow statement shows how much money was generated and spent on the business during the fiscal year. The cash flow analysis is a method of analyzing an organization's investing, financing, and operating activities. A cash flow statement reveals an organization's liquidity and solvency, as well as its ability to change cash flows in the future. It eliminates the other effects of accounting methods by improving the comparability of different organizations' operational performance.

Question

Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected
annual unit sales of the hybrid cars is 26,000; the price is $21,000 per car. Variable costs of production are $11,000 per car. The fixed
overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford's
sales of regular sedans b 9,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and
fixed costs of $250,000 per year. Depreciation costs of the production plant are $49,000 per year. The marginal tax rate is 40 percent.
What is the incremental annual cash flow from operations?
Incremental annual cash flow from operations
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