You are trying to decide whether or not to put in some new capital equipment. Your line is currently operating at full standard capacity You are putting in new equipment which will make the line more efficient and last for 10 years (depreciate equally over o sales are currently maxed out 0 years) The equipment will increase the capacity ohee and will eliminate 3 positions of manual labor wh 30%, or$3 O in additional sales. yoperational the second year Sales from this line generate 50cents profit for each dollar of sales The project will allow sales to increase by 100,000 in year 1 and in year 2 by 200,000 and 300,000 for the other years over the current maxed out base. A manual position oflabor costs $30,000 per year with benefits The equipment will costs $600,000 engineering and installation will cost $100,000 The company uses a hurdle rate of 18 % for projects of this risk type Year 6 CASH FLOW CALCULATIONS 2 5 8 9 10 Incremental sales growth Profit from incremental sales savings from eliminating manual positions Depreciation 0 0 Increase in income before taxes 0 0 C 0 C Estimated taxes at 35% C 0 0 Increase in income after taxes 0 0 0 0 0 0 0 0 Net cash Income after tax + Dep C 0 C 0 cost of equipment cost of installlation C NET CASH FLOW 0 0 0 0 0 Payback #NUMI 00 NPV