A Manufacturing Company Is Thinking of Launching a New Product. the Company Expects to Sell $950,000 of the New Product in the First Year and $1,500,000 Each Year Thereafter. Direct Costs Including Labor and Materials

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Project Statement
Year| 0| 1| 2| 3| 4| 5| 6| 7| 8|
Sales| | 950,000| 1,500,000| 1,500,000| 1,500,000| 1,500,000| 1,500,000| 1,500,000| 1,500,000| Direct Cost55% of sales(Sales * 55% = DC)| | 522,500| 825,000| 825,000| 825,000| 825,000| 825,000| 825,000| 825,000| Indirect Incremental Costs| | 80,000| 80,000| 80,000| 80,000| 80,000| 80,000| 80,000| 80,000| Depreciation(Plant Cost / Age)| | 200,000| 200,000| 200,000| 200,000| 200,000| 0| 0| 0| Total Cost(DC+IIC+D)| | 802,5000| 1,105,000| 1,105,000| 1,105,000| 1,105,000| 905,000| 905,000| 905,000| Profit Before Tax(Sales – TC)| | 147,500| 395,000| 395,000| 395,000| 395,000| 595,000| 595,000| 595,000| Marginal Tax Rate (PBT * 35%)| | 51,625| 138,250| 138,250| 138,250| 138,250| 208,250| 208,250| 208,250| Profit After Tax(PBT - MTR )| | 95,875| 256,750| 256,750| 256,750| 256,750| 386,750| 386,750| 386,750| Add Depreciation| | 200,000| 200,000| 200,000| 200,000| 200,000| 0| 0| 0| Operating Cash Flow(PAT + Depreciation) | | 295,875| 456,750| 456,750| 456,750| 456,750| 386,750| 386,750| 386,750| Cost of New Plant| -1,000,000| | | | | | | | |

Additional Inventory & Receivables| -200,000| | | | | | | | | Total Cash Flow| -1,200,000| 295,875| 456,750| 456,750| 456,750| 456,750| 386,750| 386,750| 386,750| Cost of Capital (10%)| | 1.10| 1.21| 1.33| 1.46| 1.61| 1.77| 1.95| 2.14| Discounted Cash Flow| | 268,977| 377,479| 343,163| 311,966| 283,606| 218,310| 198,464| 180,422| Outstanding Balance| -1,200,000| -904,125| -447,375| 9,375| 466,125| 922,875| 1,309,625| 1,696,375| 2,083,125| NPV (Add 1 to 8 yearsDCF – 1,200,000)| 982,388| | | | | | | | | Payback Period(P/B)*Based on...
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