A dairy farm project has an initial requirement of $600,000 for fixed assets (i.e. goats) and $60,000 for net working capital. The price of their special goat cheese packages are $30.00 with a variable cost of $20.00 per package. The goats will be depreciated to a zero book value over the 3-year life of the project and will be worthless at the end of the project because the dairy farmer plans to give the goats away as pets. All of the net working capital will be recouped after 3 years. The expected annual operating cash flow is $240,000. If the tax rate is 35 percent, how sensitive is OCF to an increase of ten additional goat cheese packages sold? Group of answer choices $3.50 $6.50 $35.00 $65.00 $100.00
A dairy farm project has an initial requirement of $600,000 for fixed assets (i.e. goats) and $60,000 for net working capital. The price of their special goat cheese packages are $30.00 with a variable cost of $20.00 per package. The goats will be depreciated to a zero book value over the 3-year life of the project and will be worthless at the end of the project because the dairy farmer plans to give the goats away as pets. All of the net working capital will be recouped after 3 years. The expected annual operating cash flow is $240,000. If the tax rate is 35 percent, how sensitive is OCF to an increase of ten additional goat cheese packages sold? Group of answer choices $3.50 $6.50 $35.00 $65.00 $100.00
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 21E: Net present value-unequal lives Bunker Hill Mining Company has two competing proposals: a processing...
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A dairy farm project has an initial requirement of $600,000 for fixed assets (i.e. goats) and $60,000 for net working capital. The price of their special goat cheese packages are $30.00 with a variable cost of $20.00 per package. The goats will be depreciated to a zero book value over the 3-year life of the project and will be worthless at the end of the project because the dairy farmer plans to give the goats away as pets. All of the net working capital will be recouped after 3 years. The expected annual operating cash flow is $240,000. If the tax rate is 35 percent, how sensitive is OCF to an increase of ten additional goat cheese packages sold?
Group of answer choices
$3.50
$6.50
$35.00
$65.00
$100.00
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