A company that manufactures recreational pedal boats has approached Kevin Cichanowski to ask if he would be interested in using current designs rotomold expertise and equipment to produce some the of the pedal boat components. Kevin is intrigued by the idea and thinks it would be an interesting way of complementing the present product line.

One of Kevin$$s hesitations about the proposal is that the pedal boats are a different shape than the kayaks that current designs produce. As a result, the company would need to buy an additional rotomold oven in order to produce the pedal boat components. This project involves risks, and Kevin wants to make sure that the returns justify the risks. In this case since this is a new venture, Kevin thinks that a $15\%$ discount rate is appropriate to use to evaluate the project.

As a intern at Current Desings, Kevin has asked you to prepare a initial evaluation of this proposal. To aid in your analysis, he has provided the following information and assumptions.

$1.$ The new rotomold oven will cost $$271,000,$ a salvage value of $$0,$ and an $8$year useful life. Straight$-$line depreciation will be used.

$2.$ The projected revenues, costs, and results for each of the $8$ years of this project are as follows.

Sales $$205,000$

Less:

Manufacturing costs $$128,200$

Depreciation $$33,875$

Shipping and administration $$16,000178,075$

Income before income taxes $26,925$

Income tax expense $11,450$

Net Income $15,475$

A$)$ annual rate of returm

B$)$ pay back period

C$)$ net present value