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

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