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Mr. Gregory White
Mr. Gregory White, Master's Degree
Category: Single Problem
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Experience:  M.A., M.S. Education / Educational Administration
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Chip's Home Brew Whiskey management forecasts that if the

Customer Question

Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Chip’s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm’s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)At $20 per bottle the Chip’s FCF is $
and at the new price Chip’s FCF is $
.
Submitted: 10 months ago.
Category: Single Problem
Expert:  Mr. Gregory White replied 10 months ago.

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