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Question
4Chip’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

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