Question
The SunShine Bathing Suit Company is considering investing in a project to develop a self-cooling bathing suit. This bathing suit will keep people cool without
The SunShine Bathing Suit Company is considering investing in a project to develop a self-cooling bathing suit. This bathing suit will keep people cool without them having to go for a swim great for parties. The marketing department feels this will be a great addition to their thermal bathing suit product (keeps you warm for winter swims). The managers have developed the following cash flow estimates (assume the firm pays no taxes): Annual sales of self cooling bathing suits = $25,000 Annual production costs of self cooling bathing suits = $19,000 Annual loss of sales of thermal bathing suits = $15,000 Annual reduction in production costs of thermal bathing suits due to loss of sales = $10,000 Research and development costs incurred over the last 4 years to develop the self- cooling bathing suit = $400 The relevant annual cash flow to be used in evaluating the investment in self-cooling bathing suits is:
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