Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $750 per unit, give or take 2 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $755. What is the operating cash flow based on this analysis?
OCF {[($755 - $260) × 2,100] - $589,000} {1 - 0.35} + ($129,000 × 0.35) = $337,975
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63.
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Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $129,000. The sales price is estimated at $775 per unit, give or take 2 percent. The tax rate is 34 percent. The company is conducting a sensitivity analysis with fixed costs of $590,000. What is the OCF given this analysis?
OCF {[($775 - $260) × 2,100] - $590,000} {1 - 0.34} + ($129,000 × 0.34) = $368,250
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64.
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Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, plus or minus 3 percent. What is the earnings before interest and taxes under the base case scenario?
EBIT for base case = [8,000 × ($64 - $11)] - $287,000 - $68,000 = $69,000
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