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Homework answers / question archive / Given the soaring price of gasoline, Ford is considering introducing a new production line of gas-electric hybrid sedans

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 is32,000; the price is $25,000per car. Variable costs of production are $10,000per 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 by11,000cars 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 $52,000per year. The marginal tax rate is40percent. What is the incremental annual cash flow from operations?

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