Transcribed Image Text
A firm sells Gizmos to consumers at a price of $87 per unit. Thecosts to produce Gizmos is $30 per unit. The company will sell14,000 Gizmos to consumers each year. The fixed costs incurred eachyear will be $140,000. There is an initial investment to producethe goods of $2,400,000 which will be depreciated straight lineover 5 year life of the investment to a salvage value of $0. Theopportunity cost of capital is 9% and the tax rate is 25%.1. What is the operating cash flow each year?2. Using the operating cash flow, what is the net present valueof the investment? And should the project be rejected oraccepted.
Other questions asked by students
General Management
Accounting