The CFO of an automotive part company has collected information to estimate the firms earnings for the next 5 years. The information available is as follows:

To build its new production line, the company is required to make a one-off investment of $44 million. It has a useful life of 5 years and a salvage value of $2 million at the end.

The estimated demand for the companys product is 20,000 units per year.

The sales price of the product will be $5,000 per unit.

Production requires 60 hours of labor per unit, and the estimated labor cost is $30 per hour. It also requires various parts and supplies that will cost $1,600 per unit.

The firm expects additional operating expenses, estimated to be $5 million per year. Answer questions a) and b) below. (Lecture notes pp.7-12)

a) Calculate (i) depreciation expense per year (assume that the firm has no other depreciable assets in place). Additionally, (ii) determine the production cost (i.e., cost of goods sold) per year (NOT to multiply annual figures by 5 years).