Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses? Multiple Choice $3,159 $3,510 −$4,266 −$3,159 −$3,900
Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses? Multiple Choice $3,159 $3,510 −$4,266 −$3,159 −$3,900
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5,400 pairs of sunglasses at a price of $149 each and a variable cost of $101 each. The equipment necessary for the project will cost $285,000 and will be depreciated on a straight-line basis over the 5-year life of the project. Fixed costs are $150,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?
Multiple Choice
-
$3,159
-
$3,510
-
−$4,266
-
−$3,159
-
−$3,900
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