Peterborough Outboard Motors (POM), a profitable maker of outboard motors for pleasure boats, would like to enter the snow blower market. POM's weighted average cost of capital is 7% and its accounting department notes depreciation expense will approximate capital cost allowances in the company's tax return. POM has gathered the following information concerning the snow blower project.

Required:
(a) Use the SVA approach to determine whether POM should proceed with producing the new snow blower.
(b) In addition to the financials, and possibly bad weather, why do you think POM is considering making and selling a snow blower?

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Yr 1 Sm 92 65 45 10 Yr 2 Sm Yr 3 Yr4 After Yr 4 Sm 180 140 69 Sales Cost of goods sold Operating expenses (including depreciation) Depreciation expense Replacement capital assets investments Additional capital assets investments Additional working capital investments Income Tax Rate 180 78 46 42 12 15 40 20% 20% 20% 20%