How sensitive operating cash flow is to sales

Reference no: EM133288029

Question: You are the CFO of MAGA Inc. You are considering a four-year project to produce red trucker hats that requires an initial investment of $625,000 in a machinery that will be fully deprecated in a straight line over the four years. The machinery has no salvage value. You believe that you can sell 85,000 units at a price of $30 per unit. The units have a variable cost of $15 and fixed costs of $280,000 annually. The tax rate of Boss is 21% and your cost of capital is 8%. The CEO is concerned with the Sales Departments projections and would like to know how sensitive Operating Cash Flow is to sales.

Reference no: EM133288029

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