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Nominal net cash flow

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Gork Musical Instruments produces several products, one of which is facing increasing competition from cheaper, plastic alternatives. It expects that in coming years the number of units sold will fall by 10% pa. In the year just completed, the fixed costs attributable to this product amounted to $35,000, while variable costs attributable to the product were $28 per unit produced. Sales this year were 28,000
units. Gork expects that in the coming years, fixed costs of this product, and variable costs per unit, will increase in line with inflation, which is forecast to be 4% pa. However, because of the competition from the plastic alternatives, it sees no scope for increasing the price per unit from its current level of $42. Based on these forecasts, the nominal net cash flow, four years from now, is forecast to be closest to:

a) $119,396

b) $128,877

c) $134,819

d) $217,886

Reference no: EM131340892

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