Freddie is assessing the proposed project. He expects to sell 12,000 units, give or take 4% with the expected variable cost per unit at $7 and expected fixed cost at $36,000. Fixed and variable cost estimates are considered correct in a plus or minus 6% range. Depreciation expense is $30,000. Tax rate is 34%. Sale price is evaluated at $14 a unit, give or take 5%. Company bases its sensitivity analysis on expected case scenario.
a. Determine the earnings before interest and taxes under expected case scenario?
b. Determine the earnings before interest and taxes under the optimistic case scenario?
c. Determine the operating cash flow for sensitivity analysis by using total fixed costs of $32,000?