Problem $3.$ Incremental Cash flows

TURRONES Company is now considering producing and selling a new product

$($for ever$)$: A light 'Turron" $($Spanish Almond Candy or Nougat, traditional Christmas

treat in Spain$)$

The production of this new "turron" requires the use of machinery from the

company which is totally depreciated. If the company did not invest in this project, would

immediately sell this machine at its book value, $5,600.$ Also, the production of this new

"turron" requires buying a new machine. The cost of this new machine is $60,000,$ and it

will be depreciated straight$-$line over $10$ years, with no resale value. The company thinks

that this new machinery can be used indefinitely.

Estimated variable costs are $0\mathrm{.}79$ per unit and the estimated fixed costs are

$10,000$ per year. The company needs to hire workers to produce this new "turron", which

costs $60,000$ per year.

Selling price per unit will be $3($constant$).$ Traditionally, the company's publicity

costs are $15,000$ per year, and the board of directors think it is not necessary to increase

them for the new "turron". However, the introduction of this new "turron" in the market

has some negative consequences for the older product of TURRONES.

Older product's annual sales are expected to decrease by $3$ units of "Traditional

Jijona turron" per each $10$ light "turron" sold. The maximum estimated production $($and

sales$)$ for this new light "turron" is $45,000$ units per year. The selling price of the older

traditional "turron" is $2,25$ per unit and its variable cost is $0\mathrm{.}4$ per unit $($both keep

constant$).$ The fixed costs of the older traditional "turron" are $10,000$ per year.

Assuming:

Tax rate is $35\%.$ Taxes are paid the year incomes were generated.

All sales and costs are in are in cash.

Opportunity cost of capital of $15\%$

Please, calculate the project Net Cash Flows after taxes.