Abuela Pastries operates a chain of bakeries and is considering the sprinkle cookie project, which would involve selling sprinkle cookies for 1 year. The firm expects sales of sprinkle cookies to be $158,000 and associated costs from flour, butter, sugar, etc. used to make sprinkle cookies to be $69,000. The firm believes that sales of frosted cookies, a type of cookie that is currently offered by the firm, would be $33,000 less with the addition of sprinkle cookies, and that costs associated with frosted cookies would be $18,000 less with the addition of sprinkle cookies. Finally, Abuela Pastries believes that selling sprinkle cookies would increase traffic to its bakeries, which would increase expected sales of bread, cakes, and other items by $23,000 more than it would be without the addition of sprinkle cookies, and increase costs of bread, cakes, and other items by $15,000 more than it would be without the addition of sprinkle cookies. What is the operating cash flow (OCF) for year 1 that Abuela Pastries should use to analyze the sprinkle cookie project? The tax rate is 41 percent and the cost of capital is 3.64 percent. Relevant depreciation is expected to be $5,000. $62,230.00 (plus or minus $10) $50,430.00 (plus or minus $10) $54,560.00 (plus or minus $10) $46,890.00 (plus or minus $10) None of the above is within $10 of the correct answer
Abuela Pastries operates a chain of bakeries and is considering the sprinkle cookie project, which would involve selling sprinkle cookies for 1 year. The firm expects sales of sprinkle cookies to be $158,000 and associated costs from flour, butter, sugar, etc. used to make sprinkle cookies to be $69,000. The firm believes that sales of frosted cookies, a type of cookie that is currently offered by the firm, would be $33,000 less with the addition of sprinkle cookies, and that costs associated with frosted cookies would be $18,000 less with the addition of sprinkle cookies. Finally, Abuela Pastries believes that selling sprinkle cookies would increase traffic to its bakeries, which would increase expected sales of bread, cakes, and other items by $23,000 more than it would be without the addition of sprinkle cookies, and increase costs of bread, cakes, and other items by $15,000 more than it would be without the addition of sprinkle cookies. What is the operating cash flow (OCF) for year 1 that Abuela Pastries should use to analyze the sprinkle cookie project? The tax rate is 41 percent and the cost of capital is 3.64 percent. Relevant depreciation is expected to be $5,000. $62,230.00 (plus or minus $10) $50,430.00 (plus or minus $10) $54,560.00 (plus or minus $10) $46,890.00 (plus or minus $10) None of the above is within $10 of the correct answer
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1dM
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 1 steps
Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials Of Business Analytics
Statistics
ISBN:
9781285187273
Author:
Camm, Jeff.
Publisher:
Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials Of Business Analytics
Statistics
ISBN:
9781285187273
Author:
Camm, Jeff.
Publisher:
Cengage Learning,
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning