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Urgent! Please help as soon as you can :) . Wernham-Mifflin is considering launching a new line of septagonal-shaped paper. You have the following information:
Urgent! Please help as soon as you can :)
. Wernham-Mifflin is considering launching a new line of septagonal-shaped paper. You have the following information: Revenues due to the sale of the new product are expected to be $86 million annually. Of this, 63% will be by cash with the remainder sold on credit. Credit sales are expected to start being repaid after 2 years. Total paper production costs will increase from the current level of $13 million annually to $44 million annually after the product launch. Hyper-aggressive sales agent Dwight Schrute will be reassigned from other projects to sell the new product line. Customers of those other products will be relieved and sales will increase by $16 million annually. The project will make use of an existing paper mill, built last year at a cost of $74 million. The mill is being depreciated using prime cost over a useful life of twenty-two years. However, due to this decision, machinery in the mill will need to be retrofit at a cost of $60 million at t=0. The retrofit machinery has a useful life of nineteen years. Wernham-Mifflin currently pays taxes at an overall tax rate of 35% and a marginal rate of 38%. What is the incremental cash flow from the project for the first year (at t= 1)? O a. $26.33 million O b. $23.15 million O c. $23.78 million O d. $24.91 million e. $25.49 millionStep by Step Solution
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