John and John Plc. is a midsized electronics manufacturing company in the West of Scotland. You have recently joined as a finance manager at John and John. Last week, the marketing manager brought a new project to your attention. This project is about manufacturing robot vacuum cleaners ETX600 with an expected product life cycle of 4 years. In 2019, John and John Plc plans to launch these new vacuum cleaners if the project is financially feasible. Research and development costs incurred in the past three years amount to 150,000. Advertising is expected to cost 25,000 in year 1. Advertising costs will reduce by 10% every year thereafter. The company expects that sales in the first year will be 800,000, second and third year sales will be 650,000 and sales in the fourth year will be 600,000. Variable costs will be 50% of sales each year and the fixed production cost is expected to be 100,000 per year. The company estimates that if these new robot vacuum cleaners are released in the market, it will affect the sales of its previous non-robot models. The marketing team has estimated a loss contribution of 25,000 per year for non-robot models ETX500 and ETX550.

John and Johns existing facilities are not adequate to produce the new vacuum cleaners. Therefore, it plans to purchase new equipment which will cost 350,000. Shipping costs and installation costs of the equipment are 20,000 and 15,000 respectively. The new equipments estimated residual value is 15,000 at the end of 4 years. Capital allowances can be claimed on this investment on a 25% reducing balance basis. Head office costs are expected to grow by 20,000 every year of the projects life as a result of manufacturing the robot vacuum cleaner. However, the accounting department allocation system will allocate 50,000 to all projects. Working capital requirements for each year of this new project are: 35,000 in year 1, 26,000 in year 2, 35,000 in year 3. John and Johns cost of capital is 12% and it pays corporate tax at a rate of 40%.

REQUIRED:

Prepare a statement of after-tax cash flows attributable to the project for each year of the new products life cycle.