Question

Cusic Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $23,500, and the company expects to sell 1,520 per year. The company currently sells 1,870 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,540 units per year. The old board retails for $21,900. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,755,000 per year, and fixed costs are $2,950,000 per year. If the tax rate is 22 percent, what is the annual OCF for the project? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)

Answer 1

=(1520*23500*(1-53%)+(1540-1870)*21900*(1-53%)-1755000-2950000)*(1-22%)+1755000
=8530633.80