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Snappy Yard has developed a new product, the Automatic Lawnmower. Snappy s paid $ 1 2 0 , 0 0 0 for a marketing survey

Snappy Yard has developed a new product, the Automatic Lawnmower. Snappys paid $120,000 for a marketing survey to determine the products viability. It is felt that Automatic Lawnmower will generate sales of $1,235,000 per year. The fixed costs will be $250,000 annually, and variable costs will amount to 20% of sales. The equipment necessary for the production of the Automatic Lawnmower will cost $865,000. It will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Snappys has a tax rate of 21% and a required return of 12%. Calculate the OCF, payback period, NPV, and IRR.

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