Assume a project has a sales quantity of 8,700 units, plus or minus 5 percent and a sales price of $69 a unit, plus or minus 2 percent. The expected variable cost per unit is $12 percent with a range of 3%, and the expected fixed costs are $280,000 plus or minus 2 percent. The depreciation expense is $68,000. The tax rate is 41 percent. What is the operating cash flow under the best-case scenario?

$180,631.767

Explanation:

Given that,

Sales quantity = 8,700 units + (5% of 8,700)

                       = 8,700 units + 435 units

                       = 9,135 units

Sales price:

= $69 + (2% of $69)

= $69 + $1.38

= $70.38

Expected variable cost per unit = $12

Expected fixed costs = $280,000 - (2% of $280,000)

                                   = $280,000 - $5,600

                                   = $274,400

Profit before tax:

= Sales - Variable cost - Fixed cost - Depreciation

= (9,135 × $70.38) - ($12 × 9,135) - $274,400 - $68,000

= $642,921.3 - $109,620 - $274,400 - $68,000

= $190,901.3

Profit after tax:

= Profit before tax - Tax at 41%

= $190,901.3 - ($190,901.3 × 0.41)

= $190,901.3 - $78,269.533

= $112,631.767

Operating cash flow:

= Profit after tax + Depreciation

= $112,631.767 + $68,000

= $180,631.767