Norfolk Company is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to...

70.2K

Verified Solution

Question

Finance

Norfolk Company is analyzing a proposed 3-year project usingstandard sensitivity analysis. The company expects to sell 22,000units, ±4 percent. The expected variable cost per unit is $13.2 andthe expected fixed costs are $51,000. The fixed and variable costestimates are considered accurate within a ±5 percent range. Thesales price is estimated at $16.8 a unit, ±5 percent. The projectrequires an initial investment of $204,000 for equipment that willbe depreciated using the straight-line method to zero over theproject's life. The equipment can be sold for $52,400 at the end ofthe project. The project requires $20,000 in net working capitalfor the three years. The discount rate is 14 percent and tax rateis 25 percent. What is the operating cash flow under the optimisticcase scenario?
A. $52,976.40 B. $56,833.70 C. $60,747.50 D. $64,572.10 E. $68,178.50

Answer & Explanation Solved by verified expert

4.5 Ratings (802 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Norfolk Company is analyzing a proposed 3-year project usingstandard sensitivity analysis. The company expects to sell 22,000units, ±4 percent. The expected variable cost per unit is $13.2 andthe expected fixed costs are $51,000. The fixed and variable costestimates are considered accurate within a ±5 percent range. Thesales price is estimated at $16.8 a unit, ±5 percent. The projectrequires an initial investment of $204,000 for equipment that willbe depreciated using the straight-line method to zero over theproject's life. The equipment can be sold for $52,400 at the end ofthe project. The project requires $20,000 in net working capitalfor the three years. The discount rate is 14 percent and tax rateis 25 percent. What is the operating cash flow under the optimisticcase scenario?A.$52,976.40B.$56,833.70C.$60,747.50D.$64,572.10E.$68,178.50