Herrera Music is considering the sale of a new sound board used in recording studios. The new board would sell for $25,500 and the company expects to sell 1,400 per year. The company currently sells 1,900 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,720 units per year. The old board retails for $21,400. Variable costs are 55 percent of sales, depreciation on the equipment to produce the new board will be $1,350,000 per year and fixed costs are $1,250,000 per year. If the tax rate is 38 percent, what is the annual OCF for the project?
I need the OCF of the new project (so the only impact the existing sound board has is the marginal reduction in net revenues from the new board) (Don' look at the entire amount of revenue from the old board, but simply the reduction in revenue and costs that are a byproduct of the new board. That is how much less do they sell? How much less revenue do they have from the old board and how much less cost from the old board?)