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Grady Precision Measurement Tools

Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 48,000 units at $18 a unit, production costs at 37% of sales price, annual fixed costs for production at $180,000, and depreciation expense (straight-line) of $240,000 per year. The company tax rate is 35%. What is the annual operating cash flow of the new GPS system?

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Annual operating cash flow= (Annual sales*(Price-Production Cost)-Fixed cost-Depreciation)*(1-tax rate) +Depreciation

= (48000*(18-18*37%)-180000-240000)*(1-35%) +240000=320808


answered by: Subrahmanyam golla
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