You are analyzing a project and have developed the following estimates. The depreciation is $88,000 a year and the tax rate is 34 percent. What is the worst case operating cash flow? Projections Base Case Lower Bound Upper Bound unit sales 2,500 2,200 2,800 price per unit $190 $180 $200 variable cost per unit $120 $100 $140 fixed costs $25,000 $23,500 $26,500 Select one: O a. C. $74,220 O b. E. $76,080 O c. B. $73,680 O d. D. $75,620 O e. A. $70,510
You are analyzing a project and have developed the following estimates. The depreciation is $88,000 a year and the tax rate is 34 percent. What is the worst case operating cash flow? Projections Base Case Lower Bound Upper Bound unit sales 2,500 2,200 2,800 price per unit $190 $180 $200 variable cost per unit $120 $100 $140 fixed costs $25,000 $23,500 $26,500 Select one: O a. C. $74,220 O b. E. $76,080 O c. B. $73,680 O d. D. $75,620 O e. A. $70,510
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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27.
Transcribed Image Text:### Project Cash Flow Analysis
You are analyzing a project and have developed the following estimates. The depreciation is $88,000 a year and the tax rate is 34 percent. What is the worst-case operating cash flow?
#### Projections
| | Base Case | Lower Bound | Upper Bound |
|----------------------|-----------|-------------|-------------|
| **Unit Sales** | 2,500 | 2,200 | 2,800 |
| **Price per Unit** | $190 | $180 | $200 |
| **Variable Cost per Unit** | $120 | $100 | $140 |
| **Fixed Costs** | $25,000 | $23,500 | $26,500 |
#### Options
Select one:
- **a.** C. $74,220
- **b.** E. $76,080
- **c.** B. $73,680
- **d.** D. $75,620
- **e.** A. $70,510
In this analysis, you will need to calculate the operating cash flow under the worst-case scenario. This involves using the lowest unit sales, the lowest price per unit, the highest variable cost per unit, and the highest fixed costs to determine the worst-case financial outcome for the project.
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