Jamies Motor Home Sales currently sells 1000 Class A motor homes 2500 Class C

Jamies motor home sales currently sells 1000 class a

This preview shows page 14 - 18 out of 73 pages.

47. Jamie's Motor Home Sales currently sells 1,000 Class A motor homes, 2,500 Class C motor homes, and 4,000 pop-up trailers each year. Jamie is considering adding a mid- range camper and expects that if she does so she can sell 1,500 of them. However, if the new camper is added, Jamie expects that her Class A sales will decline to 950 units while the Class C campers decline to 2,200. The sales of pop-ups will not be affected. Class A motor homes sell for an average of $125,000 each. Class C homes are priced at $39,500 and the pop-ups sell for $5,000 each. The new mid-range camper will sell for $47,900. What is the erosion cost? 8-14
Background image
Chapter 08 - Making Capital Investment Decisions 48. Ernie's Electrical is evaluating a project which will increase sales by $60,000 and costs by $20,000. The project will cost $125,000 and be depreciated straight-line to a zero book value over the 10 year life of the project. The applicable tax rate is 34%. What is the operating cash flow for this project? 49. Kurt's Kabinets is looking at a project that will require $80,000 in fixed assets and another $20,000 in net working capital. The project is expected to produce sales of $110,000 with associated costs of $70,000. The project has a 4-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35%. What is the operating cash flow for this project? 50. Peter's Boats has sales of $760,000 and a profit margin of 5%. The annual depreciation expense is $80,000. What is the amount of the operating cash flow if the company has no long-term debt? 8-15
Background image
Chapter 08 - Making Capital Investment Decisions 51. Le Place has sales of $440,000, depreciation of $32,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 5%. The firm has no interest expense. What is the amount of the operating cash flow? 52. Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,000. If the project is implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,500. What is the amount of the operating cash flow using the top-down approach? 53. Ronnie's Coffee House is considering a project that will produce sales of $7,000 and increase cash expenses by $2,500. If the project is implemented, taxes will increase by $1,400. The additional depreciation expense will be $1,000. An initial cash outlay of $3,000 is required for net working capital. What is the amount of the operating cash flow using the top-down approach? 8-16
Background image
Chapter 08 - Making Capital Investment Decisions
Background image
Image of page 18

You've reached the end of your free preview.

Want to read all 73 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture