Calculation of ebit and sensitivity analysis

Reference no: EM1316214

Calculation of EBIT and Sensitivity analysis

The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4%. The expected variable cost per unit is $7 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6% range. The depreciation expense is $30,000. The tax rate is 34%. The sale price is estimated at $14 a unit, give or take 5%. The company bases its sensitivity analysis on the expected case scenario.

a. What is earnings before interest and taxes (EBIT) under the expected case scenario?

b. What is EBIT under the optimistic case scenario?

c. What is the operating cash flow for a sensitivity analysis using total fixed costs of $32,000?

Reference no: EM1316214

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