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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 $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

User Benita
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1 vote

Answer:

$337,975

Step-by-step explanation:

The computation of operating cash flow is shown below:-

Sales $1,585,500

2100 × $755

Less: Variable cost $546,000

2,100 × $260

Less: Fixed cost $589,000

Less: Depreciation $129,000

Earning before tax $321,500

Tax at 35% $112,525

EAT $208,975

Add: Depreciation $129,000

Operating cash flow $337,975

Therefore the operating cash flow is $337,975

User Abhim
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