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3) A company is planning to invest in new manufacturing equipment to make a new product. The new product is expected to generate additional sales
3) A company is planning to invest in new manufacturing equipment to make a new product. The new product is expected to generate additional sales of 2,500 units at $55 each. The equipment to manufacture the new product will cost $97,500 and is expected to have a 6-year life and $14,500 in residual value. Selling expenses related to the new product are expected to be 6% of sales revenue. The cost to manufacture the new product is expected to be $39.75 per unit. Required: Determine the net cash flows for each of the six years of the project and create a schedule showing the net cash flow for each year, including the purchase of the equipment in the beginning of year 1 and the sale of the equipment at the end of year 6. Hint: The first thing to do here is to determine the annual revenues, the annual selling expenses, and the annual cost of manufacture. Using those numbers, a simple year-by-year project income statement is created for each year with the purchase and sale of the equipment added into year 1 and year 6, respectively
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