A Project Has a Seven-Year Life and an Initial Investment $\pm$

question 268

Multiple Choice

A project has a seven-year life and an initial investment of $228,700 in equipment. The equipment will be depreciated straight-line to zero over seven years. Fixed costs are $124,600. Variable costs are $8.16 per unit. Sales are estimated at 54,500 units at an average price of $11.99. The estimated ranges of each variable are: sales quantity $\pm$ 15%; sales price $\pm$ 2%; variable cost $\pm$ 10%; and fixed costs $\pm$ 4%. The tax rate is 35%. Under the worst-case scenario, what is the operating cash flow?

• A) -$54,602
• B) -$21,931
• C) -$12,878
• D) $10,740
• E) $22,549

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Definitions:

Internal Locus of Control

The belief that one's actions and decisions directly affect the outcomes and successes in their life, as opposed to external forces.

Entrepreneurs

Individuals who initiate, manage, and take on the risks of a business or enterprise.

People in General

refers to the overarching category of individuals or groups without specifying demographics, characteristics, or specifics.

Product Satisfaction

The degree to which a product meets or exceeds the expectations and needs of its users or consumers.