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31.-35. Pinnacle Products Inc. is comparing the cash flows generated by its current production facility with the estimated cash flows that may be generated

 

31.-35. Pinnacle Products Inc. is comparing the cash flows generated by its current production facility with the estimated cash flows that may be generated by a new facility. The Finance Department at Pinnacle has gathered the following information. . . . Current annual sales are $1,100,000. If the new facility comes on line, annual sales are expected to be 18% higher. Current annual operating costs are $850,000. If the new facility comes on line, annual operating costs are expected to be 14% higher. Total annual "Depreciation Expense" at the current production facility is $110,000. Annual "Depreciation Expense" is expected to to be $35,000 higher if the new production facility comes on line. "Depreciation Expense" is not included in the annual operating costs described above. The firm's marginal tax rate is 25%. Given this information, please calculate the following: a. Pinnacle Products current annual after-tax operating cash flow based on operations at the current production facility. b. Pinnacle Products proposed annual after-tax operating cash flow at the new production facility. c. The incremental anmual operating cash flow that will occur if Pinnacle invests in the proposed new production facility.

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