Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 7,200 pairs of sunglasses at a price of $167 each and a variable cost of $119 each. The equipment necessary for the project will cost $375,000 and will be depreciated on a straight-line basis over the 7-year life of the project. Fixed costs are $330,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?
A) −$5,200
B) −$4,680
C) $4,680
D) −$4,212
E) $4,212

Question

08-07-2024
Business

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Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 7,200 pairs of sunglasses at a price of $167 each and a variable cost of $119 each. The equipment necessary for the project will cost $375,000 and will be depreciated on a straight-line basis over the 7-year life of the project. Fixed costs are $330,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?
A) −$5,200
B) −$4,680
C) $4,680
D) −$4,212
E) $4,212

Sagot :

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