Reference no: EM132845250

Problem - 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 29,000; the price is $24,000 per car. Variable costs of production are $12,000 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 3,000 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 $52,000 per year. The marginal tax rate is 40 percent. What is the incremental annual cash flow from operations?