Cape Cod Cranberry Products Is Evaluating the Introduction of a New

question 92

Essay

Cape Cod Cranberry Products is evaluating the introduction of a new line of juice drinks consisting of cranberry juice blended with sweeter juices such as apple or grape.In the first year the product line is introduced, sales are forecasted at $2 000,000, Cost of Goods Sold at $1 200,000, other cash expenses at $300,000, depreciation expense at $800,000.The company has many other profitable product lines.Its marginal tax rate is 35%.Calculate operating cash flow for the first year.

---

Definitions:

Land Account

An account on the balance sheet that represents the cost of land owned by a company. Unlike other fixed assets, the land is not depreciated.

Investment

The allocation of resources (such as capital or time) with the expectation of receiving future returns.

Fair Value

The price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Unrealized Profits

Profits that have occurred on paper due to an asset's increased value but have not yet been cashed in by selling the asset.