Calculate after-tax incremental annual cash flow

Assignment Help Accounting Basics

Reference no: EM133015740

Question: Mitcham Ltd is considering a 4-year project to introduce a new clothes dryer, Cooldry. The company tax rate is 32%. The following is the additional information about the project.

(i) The expected annual unit sales of Cooldry is 150,000 units; the price is $1600 per unit. The variable production costs are $1150 per unit. The fixed overhead cost consisting of an apportionment of the salaries of the top executives is $400,000 per year.

(ii) The production of Cooldry will require the purchase of a new production line at a cost of $5,300,000. The production line will be fully depreciated over the project life of 4 years using straight-line depreciation method.

(iii) $45,000 and $22,000, respectively, have been spent on developing the prototype of Cooldry and a market survey to assess the demand for Cooldry.

(iv) The introduction of Cooldry is expected to reduce the sales of Mitcham's existing clothes dryer, Quickdry by 52,000 units per year. Quickdry has a unit price of $1300 per unit, a unit variable cost of $750 and fixed costs of $172,000 per year.

Assess and explain whether or not each of the items (i) to (iv) above should be included in the estimation of the incremental annual cash flow from operations. Calculate the after-tax incremental annual cash flow from operations.

Reference no: EM133015740

Questions Cloud

Attracting three imminently qualified candidates : You own an organization that has acknowledged that historically it has not done the best job at hiring people over 55 and less than 25 years old. You have spent

How might economic integration impact international logistic : How might economic integration impact international logistics?

What question case is trying to address : What question(s) this case is trying to address? How good is this regression Model? What are the metrics that you would use to answer this question?

Do people skills trump technical skills : Studies have shown that leader with strong interpersonal skills do better and are more successful even if they do not have the technical skills and abilities of

Calculate after-tax incremental annual cash flow : Calculate the after-tax incremental annual cash flow from operations - Mitcham Ltd is considering a 4-year project to introduce a new clothes dryer

Relate malaysia gross domestic product in 2019 : Relate Malaysia's Gross Domestic Product in 2019 compared to Philippines and Singapore and describe its forecast in the next three years.

How you would handle the situation when you discovered : Explain how you would handle the situation when you discovered that a trust account was overdrawn. Include who you would report the discrepancy to outside your

What is the role and functions of software packages : What is the role and functions of software packages for real estate trust accounts?

What are the components of competitive strategy : What are the components of competitive strategy? Within competitive strategy what is the relevance of a value change framework?

User Account

All Pages