Create a spreadsheet showing the annual net income, cash flows, and net present

value of the project. Use the absorption costing method for your annual income

statements. Once you have net income computed, convert your net income to cash flow

by adding back to net income any non-cash expenses. When annual cash flows are

computed you are ready to find the present value of each of those annual cash flows.

Add your present values together and net with the initial costs/startup costs to find the

net present value.

The Ebitts Field Corporation manufactures baseball gloves. Charlie Botz, the companys

top salesperson, has recommended expanding into the baseball bat business. He put

together a project proposal that includes the following information:

New production equipment will cost $75,000 and will be depreciated using the

straight-line method over 5 years. This equipment can be sold for $10,000 at the

end of the project (year 6).

Setting up production and establishing distribution channels will have a $300,000

startup cost. These expenses are deductible for tax purposes.

The unit sales forecast for baseball bats is as follows:

	Aluminum Bats	Wooden Bats
Year 1	6000	8000
Year 2	9000	12000
Year 3	15000	14000
Year 4	18000	20000
Year 5	20000	22000
Year 6	22000	24000

The company expects manufacturing costs to be $11 per unit for aluminum bats

and $9 per unit for wood bats.

The expected gross margin is $7 per unit for aluminum bats and $3 per unit for

wood bats.

Other expenses associated with the project are estimated at $20,000 per year

during the first 2 years and $40,000 per year for the last 4 years.

The company has enough available space in their existing manufacturing facility

that has no alternative use at this time.

The company has a marginal tax rate of 35%.

Use a 12% rate of return for your present value calculations

Please show Formulas on how to solve!!!