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A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.49 that consumers will love Happy Forever, and in this case, annual sales will be 1.08 million bottles; a probability of 0.38 that consumers will find the smell acceptable and annual sales will be 173,000 bottles; and a probability of 0.13 that consumers will find the smell unpleasant and annual sales will be only 55,000 bottles. The selling price is $37, and the variable cost is $10 per bottle. Fixed production costs will be $1.00 million per year, and depreciation will be $1.15 million. Assume that the marginal tax rate is 40 percent. What are the expected annual incremental after-tax free cash flows from the new fragrance?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92415631

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