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

question 142

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 ±15%; sales price ± 2%; variable cost ± 10%; and fixed
Costs ± 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:

Value Proposition

A statement that communicates the benefits and value that a company or product promises to deliver to its customers.

Marketing Research Process

A systematic approach to identifying marketing problems or opportunities, collecting and analyzing information, and recommending actions.

Research Problem

A clearly defined issue or question that a researcher aims to answer or solve through systematic investigation.

Research Plan

An outline of what data will be gathered, how it will be collected, and how it will be analyzed to answer specific research questions or meet objectives.