Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans
Posted: Sun Apr 17, 2022 6:23 pm
Given the soaring price of gasoline, Ford is considering
introducing a new production line of gas-electric hybrid sedans.
The expected annual unit sales of the hybrid cars is 36,000;
the price is $23,000 per car. Variable costs of production are
$9,000 per car. The fixed overhead including salary of top
executives is $80 million per year. However, the introduction of
the hybrid sedan will decrease Ford’s sales of regular sedans
by 10,000 cars per year; the regular sedans have a unit
price of $20,000, a unit variable cost of $12,000, and fixed costs
of $250,000 per year. Depreciation costs of the production plant
are $46,000 per year. The marginal tax rate
is 40 percent. What is the incremental annual cash flow
from operations?
Incremental annual cash flow from operations $
introducing a new production line of gas-electric hybrid sedans.
The expected annual unit sales of the hybrid cars is 36,000;
the price is $23,000 per car. Variable costs of production are
$9,000 per car. The fixed overhead including salary of top
executives is $80 million per year. However, the introduction of
the hybrid sedan will decrease Ford’s sales of regular sedans
by 10,000 cars per year; the regular sedans have a unit
price of $20,000, a unit variable cost of $12,000, and fixed costs
of $250,000 per year. Depreciation costs of the production plant
are $46,000 per year. The marginal tax rate
is 40 percent. What is the incremental annual cash flow
from operations?
Incremental annual cash flow from operations $