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Precise Machinery is analyzing a proposed project. The company expects to sell 7,500 units, ±10 percent....

Precise Machinery is analyzing a proposed project. The company expects to sell 7,500 units, ±10 percent. The expected variable cost per unit is $314 and the expected fixed costs are $647,000. Cost estimates are considered accurate within a ±4 percent range. The depreciation expense is $187,000. The sales price is estimated at $849 per unit, give or take 2 percent. The tax rate is 21 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $850. What is the operating cash flow based on this analysis?

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Answer #1

Statement showing operating cash flow based on selling price of $850

Particulars Amount
Sales amount(850*7500) 6375000
Less vaiable cost (314*7500) 2355000
Fixed cost 647000
Depreciation 187000
PBT 3186000
Tax @ 21% 669060
PAT 2516940
Add: Depreciation 187000
Operating cash flow 2703940
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