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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
Toying With Nature wants to take advantage of children's fascination with dinosaurs by adding several scalemodel dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at units at a price of $ per unit. Variable manufacturing costs are estimated at $ per unit, incremental fixed manufacturing costs excluding depreciation at $ annually, and additional selling and general expenses related to the dinosaurs at $ annually.
To manufacture the dinosaurs, the company must invest $ in design molds and special equipment. Because toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a threeyear service life with only a $ salvage value. Depreciation will be computed on a straightline 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 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 for this project the payback period, return on average investment, and net present value, discounted at an annual rate of percent. Round the payback period to the nearest tenth of a year and the return on average investment to the nearest tenth of a percent. Use Exhibits and where necessary.
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Compute for this project the payback period, return on average investment, and net present value, discounted at an annual rate of percent. Round the payback period to the nearest tenth of a year and the return on average investment to the nearest tenth of a percent. Use Exhibits and where necessary.
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