Question

осое. оог тр IL UIVU UUTIPICI NULUIE. UU, U UITP P10-12 (similar to) : Question Help Operating cash flow. Huffman Systems has forecasted sales for its new home alarm systems to be 65,000 units per year at $41.00 per unit. The cost to produce each unit is expected to be about 41% of the sales price. The new product will have an additional $480,000 of fixed costs each year, and the manufacturing equipment will have an initial cost of $2,900,000 and will be depreciated over eight years (straight line). The company tax rate is 35%. What is the annual operating cash flow for the alarm systems if the projected sales and price per unit are constant over the next eight years? What is the annual operating cash flow for the alarm systems? $ | (Round to the nearest dollar.)

Answer 1

sales = 65000 * 41 = 2665000

depreciation per year  = 2900000/8

= 362500

operating cash flow = (sales - costs) * (1 - tax rate) + depreciation * tax rate

= (2665000 - 2665000*0.41 - 480000) * (1-0.35) + 362500 * 0.35

= 836902.5