Assume management believes that auto restorers will pay $3000 retail per engine block.

The managers of PonchoParts, Inc. plan to manufacture engine blocks for classic cars from the 1960's era. They expect to sell 250 engine blocks annually for the next 5 years. The necessary foundry and machining equipment will require an outlay of $800,000. This amount will be depreciated straight line to zero over the projects life. The firm expects to be able to dispose of the manufacturing equipment for $150,000 at the end of the project. Labor and material costs total $500 per block, fixed costs are $125,000 per year. Assume a 35% tax rate and a 12% discount rate