A Project Has a Seven-Year Life and an Initial Investment

Multiple Choice

A project has a seven-year life and an initial investment of $228,700 in equipment. The equipment will be depreciated straight-line to zero over seven years. Fixed costs are $124,600. Variable costs
Are $8.16 per unit. Sales are estimated at 54,500 units at an average price of $11.99. The estimated
Ranges of each variable are: sales quantity ±15%; sales price ± 2%; variable cost ± 10%; and fixed
Costs ± 4%. The tax rate is 35%. Under the worst-case scenario, what is the operating cash flow?

A) -$54,602
B) -$21,931
C) -$12,878
D) $10,740
E) $22,549