$ 55 Purchase price of new equipment 600,000 Disposal of existing equipment Loss on Disposal 120,000 Less: tax benefit (40%) (48,000) 72,000 Cost of market research study $88,000 Total Investment $760,000 Contribution Margin from Product Using new equipment [18,000 x ($40-$14)] 468,000 Using the existing equipment [11,000 x $40] 242,000 Increase in contribution margin 226,000 : Depreciation (120,000) Increase in before tax profit 106,000 : Income tax (40%) (42,400) Increase in profit 63,600 E: 14% cost of capital on the additional investment required [0.14 x $760,000} 106,400 Net annual return of proposed investment in new equipment (42,800) GE's Chief Financial Officer perused the caiculation of the sales manager and assessed that a number of errors have been made. As the rm's management accountant, the CFO has asked you to prepare a revised analysis of this investment proposal