The Garden Mart Is Analyzing a Proposed 3-Year Project

question 4

Multiple Choice

The Garden Mart is analyzing a proposed 3-year project.Expected sales are 16,000 units,±6 percent.The expected variable cost per unit is $4,and the expected fixed costs are $16,000.The fixed and variable cost estimates have a range of ±1 percent.The sales price is estimated at $15 a unit,±3 percent.The project requires an initial investment of $41,000 for equipment that will be depreciated using the straight-line method to zero over the project's life.The equipment can be sold for $12,000 at the end of the project.The project requires $5,600 in net working capital.The discount rate is 16 percent,and the tax rate is 35 percent.What is the operating cash flow under the optimistic case scenario?

• A)$120,063.17
• B)$118,542.27
• C)$121,153.09
• D)$122,694.40
• E)$117,947.60

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Definitions:

Double Scoop

Typically refers to two servings of ice cream, often served in a cone or cup.

Profit

The financial benefit realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Organic

Organic refers to products or methods that rely on farming without the use of synthetic pesticides, fertilizers, genetically modified organisms (GMOs), or other artificial agents.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation and some degree of market power for each firm.