Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 31,000; the price is $25,000 per car. Variable costs of production are $11,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford s sales of regular sedans by 10,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $50,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? (Round answer to the nearest whole dollar, e.g. 5,275.)
Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans. The expected annual unit sales of the hybrid cars is 31,000; the price is $25,000 per car. Variable costs of production are $11,000 per car. The fixed overhead including salary of top executives is $80 million per year. However, the introduction of the hybrid sedan will decrease Ford s sales of regular sedans by 10,000 cars per year; the regular sedans have a unit price of $20,000, a unit variable cost of $12,000, and fixed costs of $250,000 per year. Depreciation costs of the production plant are $50,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations? (Round answer to the nearest whole dollar, e.g. 5,275.)
Chapter29: Service-entrance Calculations
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Transcribed Image Text:Given the soaring price of gasoline, Ford is considering introducing a new
production line of gas-electric hybrid sedans. The expected annual unit sales
of the hybrid cars is 31,000; the price is $25,000 per car. Variable costs of
production are $11,000 per car. The fixed overhead including salary of top
executives is $80 million per year. However, the introduction of the hybrid
sedan will decrease Ford s sales of regular sedans by 10,000 cars per year;
the regular sedans have a unit price of $20,000, a unit variable cost of
$12,000, and fixed costs of $250,000 per year. Depreciation costs of the
production plant are $50,000 per year. The marginal tax rate is 40 percent.
What is the incremental annual cash flow from operations? (Round answer
to the nearest whole dollar, e.g. 5,275.)
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