Principles of Managerial Accounting Chapter 11 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 company's 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-ine 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 . . start up cost. These expenses are deductible for tax purposes. The unit sales forecast for baseball bats is as follows: Aluminum Wood bats bats Year 1 6,000 8,000 12,000 14,000 20,000 22,000 24,000 Year 2 9,000 Year 3 15,000 18,000 Year 5 20,000 22,000 Year 4 Year 6 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. . cags : sees