Precise Machinery Is Analyzing a Proposed Project

question 68

Multiple Choice

Precise Machinery is analyzing a proposed project.The company expects to sell 2,100 units,give or take 5 percent.The expected variable cost per unit is $260 and the expected fixed costs are $589,000.Cost estimates are considered accurate within a plus or minus 4 percent range.The depreciation expense is $129,000.The sales price is estimated at $775 per unit,give or take 2 percent.The tax rate is 34 percent.The company is conducting a sensitivity analysis with fixed costs of $590,000.What is the OCF given this analysis?

• A)$337,975
• B)$285,350
• C)$368,250
• D)$374,874
• E)$414,350

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Definitions:

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus how much they actually receive, measured by the area above the supply curve and below the market price.

Government Tax

is a compulsory financial charge imposed by a government on individuals, organizations, or transactions to fund public expenditure.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service relative to its market price, representing the benefit to consumers from participating in the market.