Problem 26.1A Capital Budgeting and Determination of Annual Net Cash Flows (LO26-1, LOS 3, LO26-4) Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-moi to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $43,000 annually additional selling and general expenses related to the dinosaurs at $53,000 annually. To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads popularity rather quickly, Toying With Nature anticipates the special equipment will have a three-year service life with only salvage value. Depreciation will be computed on a straight-line basis. All revenue and expenses other than depreciation w received or paid in cash. The company's combined federal and state income tax rate is 40 percent. Required: a. Prepare a schedule showing the estimated increase in annual net income from the planned manufacture and sale of din b. Compute the annual net cash flows expected from this project. c. Compute the following. Assume discounted at an annual rate of 15 percent. Use Exhibits 26-3 and 26-4 where necessary