Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $42,000 annually, and additional selling and general expenses related to the dinosaurs at $59,000 annually.

To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a three-year service life with only a $20,000 salvage value. Depreciation will be computed on a straight-line basis. All revenue and expenses other than depreciation will be received or paid in cash. The company's combined federal and state income tax rate is 40 percent.

Required:

a. Prepare ....a schedule showing the estimated increase in annual net income from the planned manufacture and sale of dinosaur toys.

b. Compute the annual net cash flows expected from this project.

c. Compute the following. Assume discounted at an annual rate of 15 percent. UseExhibits 26-3and26-4where necessary.

Present Value of $1 Due in n Periods* EXHIBIT 26-3 Number of Discount Rate Present Value of $1 Payable Periods in n Periods (n) 1% 11/2% 5% 6% 8% 10% 12% 15% 20% 990 985 .952 .943 926 909 893 870 833 ONOUTAWN .980 .971 .907 .890 .857 .826 .797 .756 .694 .971 956 864 .840 .794 .751 .712 .658 .579 961 .942 823 .792 .735 .683 636 .572 .482 951 928 784 .747 .681 621 .567 .497 .402 942 .915 .746 .705 .630 .564 .507 .432 .335 933 .901 .711 .665 583 513 .452 .376 .279 .923 888 677 .627 .540 467 .404 .327 .233 9 .914 .875 .645 .592 .500 .424 .361 .284 . 194 10 905 862 614 .558 463 .386 .322 .247 . 162 20 .820 .742 377 .312 .215 . 149 .104 .061 .026 24 .788 .700 .310 .247 . 158 . 102 .066 .035 .013 36 .699 .585 . 173 . 123 .063 .032 .017 .007 .001 "The present value of $1 is computed by the formula p = 1/(1 + ijn, where p is the present value of $1, / is the discount rate, and n is the number of periods until the future cash flow will occur. Amounts in this table have been rounded to three decimal places and are shown for a limited number of periods and discount rates. Many calculators are programmed to use this formula and can compute present values when the future amount is entered Saint Leo University - M x Module 8 Problem Test X & Connect x Exhibit_26_3.jpg (965x4 x Exhibit_26_3.jpg (965x4 x 3 Exhibit_26_4.jpg (982x4 x + X > C A ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/williams18e/Exhibit_26_3.jpg GAN Present Value of $1 Due in n Periods* EXHIBIT 26-3