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supporter of the new plant. Sarah Young, the company's chief financial officer, is not so sure that the plant is a good idea. Currently, the
supporter of the new plant. Sarah Young, the company's chief financial officer, is not so sure that the plant is a good idea. Currently, the company purchases its skateboards from foreign manufacturers. The following figures were estimated for the construction of a new plant: Cost of plant Annual cash inflows Annual cash outflows Estimated useful life Salvage value Discount rate $7,380,000 $7,380,000 $6,826,500 15 years $1,230,000 8% Jason believes that these figures understate the true potential value of the plant. He suggests that by manufacturing its own skateboards the company will benefit from a "buy Canadian" patriotism. He also notes that the firm has had numerous quality problems with the skateboards manufactured by its suppliers. He suggests that the inconsistent quality has resulted in lost sales, increased warranty claims, and some costly lawsuits. Overall, he believes sales will be $307,500 higher each year than projected above, and that the savings from lower warranty cost
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