Toying With Nature wants to take advantage of children's 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 $44,000 annually, and additional selling and general expenses related to the dinosaurs at $51,000 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. Use Exhibits 26-3 and 26-4 where necessary. Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a schedule showing the estimated increase in annual net income from the planned manufacture and sale of dinosaur toys. TOYING WITH NATURE Schedule of Estimated Net Income Estimated sales Less estimated incremental costs: Variable manufacturing costs Fixed manufacturing costs Selling and general expenses Depreciation expense Income before income taxes Income taxes expense Estimated increase in annual net income 0 0 $ 0 < Required A Required B > EXHIBIT 26-4 Present Value of a $1 Annuity Receivable Each Period for n Periods EXHIBIT 26-3 Present Value of $1 Payable in n Periods Present Value of $1 Due in n Periods* Present Value of $1 to Be Received Periodically for n Periods Number of Discount Rate Number of Discount Rate Periods Periods 1% 112% 5% 6% 8% 10% 12% 15% 20% 1% 112% 5% 6% 8% 10% 12% 15% 20% (n) (n) 1 990 .985 952 .943 926 909 .893 .870 .833 1 0.990 0.985 0.952 0.943 0.926 0.909 0.893 0.870 0.833 23456789028 1.970 1.956 1.859 1.833 1.783 1.736 1.690 1.626 1.528 2.941 2.912 2.723 2.673 2.577 2.487 2.402 2.283 2.106 3.902 3.854 3.546 3.465 3.312 3.170 3.037 2.855 2.589 4.853 4.783 4.329 4.212 3.993 3.791 3.605 3.352 2.991 5.795 5.697 5.076 4.917 4.623 4.355 4.111 3.784 3.326 6.728 6.598 5.786 5.582 5.206 4.868 4.564 4.160 3.605 7.652 7.486 6.463 6.210 5.747 5.335 4.968 4.487 3.837 8.566 8.361 7.108 6.802 6.247 5.759 5.328 4.772 4.031 10 9.471 9.222 7.722 7.360 6.710 6.145 5.650 5.019 4.192 18.046 17.169 12.462 11.470 9.818 8.514 7.469 6.259 4.870 21.243 20.030 13.799 12.550 10.529 8.985 7.784 6.434 4.937 234567802228 .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 .820 .742 .377 .312 .215 .149 .104 .061 .026 .788 .700 .310 .247 .158 .102 .066 .035 .013 .699 585 .173 123 .063 .032 .017 .007 .001 30.108 27.661 16.547 14.621 11.717 9.677 8.192 6.623 4.993