New Ventures Enterprises Inc. is considering a proposal to invest 600,000 in new Cell Telephone Product.production equipment which will be depreciated on a straight-line basis with a 6-year life, and no salvage value. The projected annual revenues and costs of the new product that will be produced from the equipment are:

Sales$565,000

Variable Manufacturing costs$100,000

Variable Selling and administrative$74,000

Fixed Costs: In-Direct Labor$150,000

Fixed Manufacturing costs$52,500

Income tax expense rate is 15%

Present Value of an Annuity of $1.00 Table

Periods (n) 8% 9% 10% 11% 12% 15% 18% 20% 24% 3 2.5771 2.5313 2.4869 2.4437 2.4018 2.2832 2.1743 2.1065 1.9813 4 3.3121 3.2397 3.1699 3.1025 3.0374 2.8550 2.6901 2.5887 2.4043 5 3.9927 3.8897 3.7908 3.6959 3.6048 3.3522 3.1272 2.9906 2.7454 6 4.6229 4.4859 4.3553 4.2305 4.1114 3.7845 3.4976 3.3255 3.0205 7 5.2064 5.0330 4.8684 4.7122 4.5638 4.1604 3.8115 3.6046 3.2423 8 5.7466 5.5348 5.3349 5.1461 4.9676 4.4873 4.0776 3.8372 3.4212 9 6.2469 5.9953 5.7590 5.5371 5.3283 4.7716 4.3030 4.0310 3.5655 

Instructions:

1.Develop and document a multi-step Income Statement that includes Sales, Cost of Goods Sold, Gross Profit, Fixed Expenses, Operating Income, Income Tax Expense and Net Income

2.Showing and labeling all calculations, compute the following capital budgeting metrics:

(a)Compute the annual rate of return.

(b)Compute the cash payback period.

(c)Compute the net present value assuming a 10% required rate of return.

(d)Determine the estimated internal rate of return.

(e)Provide a written evaluation that explains and supports your decision as to whether or not New Ventures Enterprises Inc. should invest in building the new Cell Phone product?Specifically, refer to your calculations in parts (a) through (d) above.