Miller Mfg. is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 4 percent. The expected variable cost per unit is $11 and the expected fixed costs are $290,000. 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, give or take 3 percent. What is the operating cash flow under the best case scenario?
OCFbest case = {{[($64 × 1.03) - ($11 × 0.95)] × (8,000 × 1.04)} - ($290,000 × 0.95)} {1 - 0.32} + ($68,000 × 0.32) = $148,247
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66.
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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, give or take 3 percent. What is the net income under the worst case scenario?
Net incomeworst = {{[($64 × 0.97) - ($11 × 1.05)] × (8,000 × 0.98)} - ($287,000 × 1.05) - $68,000} {1 - 0.32} = $18,228
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67.
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Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, plus or minus 5 percent. The expected variable cost per unit is $3.20 and the expected fixed costs are $30,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $24,000. The tax rate is 34 percent. The sales price is estimated at $7.50 a unit, plus or minus 4 percent. What is the operating cash flow for a sensitivity analysis using total fixed costs of $31,000?
OCF = [(12,000 × ($7.50 - $3.20)] - $31,000][1 - 0.34] + ($24,000 × 0.34) = $21,756
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