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 $43,000 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. Because 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 for this project the (1) payback period, (2) return on average investment, and (3) net present value, discounted at an annual rate of 15 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 26-3 and 26-4 where necessary. Complete this question by entering your answers in the tabs below. Prepare a schedule showing the estimated increase in annual net income from the planned manufacture and sale of dinosaur toys. 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