Owen Surf Sports is an idea of two budding entrepreneurs. Their plan is to sell kiteboards from a store in the local town. Between them, they invest $$30,000$ in capital and are in the process of applying for a bank loan, also for $$30,000.$ The loan would be repaid in four years. The owners will also pay the bank annual interest at a rate of $6$ percent.

The owners are working on a business plan that the bank has requested. The store would sell only two models of kites initially, the X$-1$ and the X$-2.$ Data on the kites are given as follows:

X$-1$ X$-2$

Expected annual sales $($units$)400200$

Retail price $($per unit$)$ $ $800$ $ $1,400$

Purchase cost $($per unit$)5801,000$

Additional information on the planned operations for the year includes the following:

Equipment costing $$48,000$ will be purchased for cash when the store opens. The equipment will be depreciated over five years using straight$-$line depreciation.

The owners expect sales to occur uniformly over the year. Sales will be both for cash $(60$ percent$)$ and on account $(40$ percent$).$ Sales on account are assumed to be collected in two months.

The owners will maintain inventory equal to one$-$half of a month$$s sales. All kites will be purchased from the manufacturer on credit with payment made one month after purchase.

Annual cash selling, general, and administrative expenses are $$45,000$ fixed plus $15$ percent of revenues.

The applicable income tax rate is $20$ percent.