Problem 9-8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $23, 800, and the company expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
Problem 9-8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $23, 800, and the company expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
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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![Problem 9 - 8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new
sound board used in recording studios. The new board would sell for $23, 800, and the company
expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per
year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The
old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment
to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If
the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ae5f27a-5f07-4417-9113-102f00d5164e%2F7f9b266b-bd40-4462-a5fa-cf983ed4ac6e%2Fwot8ote_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 9 - 8 Calculating Project OCF [LO 2] Shue Music Company is considering the sale of a new
sound board used in recording studios. The new board would sell for $23, 800, and the company
expects to sell 1,550 per year. The company currently sells 1,900 units of its existing model per
year. If the new model is introduced, sales of the existing model will fall to 1,570 units per year. The
old board retails for $22,200. Variable costs are 56 percent of sales, depreciation on the equipment
to produce the new board will be $1,575,000 per year, and fixed costs are $3,025,000 per year. If
the tax rate is 25 percent, what is the annual OCF for the project? Note: Do not round intermediate
calculations and round your answer to the nearest whole number, e.g., 32.
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