Franklin lumber Annual cash flows Nakoi Dakota Sales $ 2,669,760 $ 3,114,720 Less : cost of good sold Raw materials 1,922,227 2,242,598 Direct labor 287,040 254,800 Over head cost 81,120 $ 2,290,387 62,400 $ 2,559,798 Gross profit $ 379,373 $ 554,922 Operating expences: Annal maintenance cost 54,080 62,400 Depreciation 107,150 $ 161,230 185,714 $ 248,114 Operating income 218,143 6,807 Less: Tax 87,257 122,723 Net income 130,886 184,084 Add : Depreciation 107,150 185,714 Annual cash flows 238,036 369,799 Working: Nakoi Dakota Selling price 1.854 1.854 Direct labor 287040 254800 Overhead cost 81120 62400 maintenance cost 54080 62400 Payback period Dakota: Years 0 1 2 3 4 5 6 7 Cash flows $ (1,300,000) 369798.67 369798.67 369798.67 369798.67 369798.67 369798.67 759798.67 $ (930,201) $ (560,403) $ (190,604) $ 179,195 0.52 Payback period 3.52 Years Nakoi: Years 0 1 2 3 5 6 Cash flows S (750,000) 238035.68 238035.68 238035.68 238035.68 238035.68 238035.68 313035.68 $ (511,964) $ (273,929) $ (35,893) $ 202,143 0.15 Payback period 3.15 Years