Accounting.

Solve the problem ASAP.

Question 1 The GFA Company, originally established 16 years ago to make football, is now a leading producer of tennis balls, baseballs, footballs, and golf balls. Nine years ago, the company introduced "High Flite," its first line of high-performance golf balls. GFA management has sought opportunities in whatever businesses seem to have some potential for cash flow. Recently Mr. Dawadawa, vice president of the GFA Company, identified another segment of the sports ball market that looked promising and that he felt was not adequately served by larger manufacturers. As a result, the GFA Company investigated the marketing potential of brightly coloured bowling balls. GFA sent a questionnaire to consumers in three markets: Accra, Kumasi, and Koforidua. The results of the three questionnaires were much better than expected and supported the conclusion that the brightly coloured bowling balls could achieve a 10 to 15 percent share of the market. Of course, some people at GFA complained about the cost of test marketing, which was GHe 250,000. Also, the feasibility test carried out by analysts to assess the viability of the project costs GHe 100,000. In any case, the GFA Company is now considering investing in a machine to produce bowling balls. The bowling balls would be manufactured in a building owned by the firm and located near Madina. This vacant building and the land can be sold for GHe 150,000 after taxes. Working with his staff, Dawadawa is preparing an analysis of the proposed new product. He summarizes his assumptions as follows: The cost of the bowling ball machine is GHe100,000 and it is expected to last five years. At the end of five years, the machine will be sold at a price estimated to be GHe 30,000. The machine is depreciated on straight-line basis. The company is exempt from capital gains tax. Production by year during the five-year life of the machine is expected to be as follows: 5,000 units, 8,000 units, 12,000 units, 10,000 units, and 6,000 units. The price of bowling balls in the first year will be GH@20. The bowling ball market is highly competitive, so Dawadawa believes that the price of bowling balls will increase at only 2 percent per year, as compared to the anticipated general inflation rate of 5 percent. Conversely, the plastic used to produce bowling balls is rapidly becoming more expensive. Because of this, production cash outflows are expected to grow at 10 percent per year. First-year production costs will be GHe 10 per unit. Also, *Soft Flite' a substitute product, is expected to have a drop in its sales by 1000 units per annum. The selling price per unit of existing products is GH45 while the variable cost is GHe 4. This has no tax implications for the new product. Dawadawa has determined, based on GFA's taxable income, that the appropriate incremental corporate tax rate in the bowling ball project is 34 percent. Like any other manufacturing firm, GFA finds that it must maintain an investment in working capital. Management determines that initial investment (at Year 0) in net working capital of GHe 10,000 is required. Subsequently, net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final year of the project, net working capital will