Precise Machinery Is Analyzing a Proposed Project

Multiple Choice

Precise Machinery is analyzing a proposed project. The company expects to sell 7,500 units, ±10 percent. The expected variable cost per unit is $314 and the expected fixed costs are $647,000. Cost estimates are considered accurate within a ±4 percent range. The depreciation expense is $187,000. The sales price is estimated at $849 per unit, give or take 2 percent. The tax rate is 21 percent. The company is conducting a sensitivity analysis on the sales price using a sales price estimate of $850. What is the operating cash flow based on this analysis?

A) $2,703,940
B) $2,293,089
C) $1,986,675
D) $2,354,874
E) $2,284,837