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Santo Monte forecasts that if it sells each bottle of Vodka for $20, then the...

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Finance

Santo Monte forecasts that if it sells each bottle of Vodka for $20, then the

demand for the product will be 15 000 bottles per year, whereas sales will be 89 per cent

as high if the price is raised 19 per cent. Santos variable cost per bottle is $10, and the

total fixed cash cost for the year is $100 000. Depreciation and amortisation charges are

$20 000, and the company is in the 30 per cent tax rate. The company anticipates an

increased working capital need of $3000 for the year. What will be the effect of a price

increase on the companys FCF for the year?

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