Highlight Case Study 3 Constructed Response Answer Hocus Pocus Company wants to increase sales by adding a new product line. The company is considering three different projects. However, its capital budget is limited to $1,500,000. In addition, the company requires a rate of return of 10%. The information concerning the three product lines is given below. Net Initial Investment Broomsticks $1,170,000 Magic Wands $983,000 Crystal Balls $2,210,000 Budgeted Income Statement for the next five years: Sales $500,000 $450,000 $650,000 Cost of Goods Sold 80,000 50,000 32.000 Gross Margin 420,000 400,000 618,000 Marketing and Administrative Expenses 100,000 130,000 22.000 7 Net Income Assume all amounts stated on the budgeted income statement are cash items.