After one year using the TopCap system, Jonathan Smith, vice president for marketing at C&C Sports, is convinced that the company could sell even more baseball caps. Apparently, the market demand for plain caps that are suitable for logo embroidery by corporations, fraternities, and other groups is greater than current manufacturers can supply. The potential for C&C Sports to extend its sales of baseball caps beyond the athletic team market is huge. The initial specifications for the Top Cap system required three workers per eight-hour shift to make up to 1.000 caps per day. Based on initial demand forecasts, Jonathan asked Chad Davis, vice president for operations, to make 240,000 caps in the first year the product was offered. Jonathan is convinced that C&C could sell at least 480.000 caps per year with the correct investment in marketing. The Cash flow reflects making 240,000 caps. Cash Flow Amount Cash Inflows Sales revenue $1.920.000 Cash Outflows Purchase and installation of TopCap system 303.525 Purchase of direct materials 1,200,000 Direct labor 384.000 Variable overhead 211.200 Variable selling expense 12.000 Fixed expenses 50.000 Cash Flow Timing Amount 12% PV Factor Present Value Sales revenue Years 1-9 1,920,000 5.3282 $10.230.144.00 Direct materials Years 1-9 (1.200.000) 5.3282 (6,393.840.00) Direct labor Years 1-9 (384.000) 5.3282 (2,046,028.80) Variable overhead Years 1-9 (211.200) 5.3282 (1,125,315.84) Variable selling Years 1-9 (12,000) 5.3282 (63,938.40 Net present value $601,020.96 (b) What additional one-time marketing cost could be justified to increase sales to meet anticipated demand? Remember that there are only 9 years of usable life remaining for the TopCap system and that C&C Sports uses a 12% discount rate. B 1 T T T. 99 T O Word(s)