Heck manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product...

Heck manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 the second and third year and $2,000,000 per year thereafter. Direct costs including labor and materials will be 40% of sales. Indirect incremental costs are estimated at $110,000 a year. The project requires a new plant that will cost a total of $2,000,000, which will be a depreciated straight line over the next 5 years.

The firm's marginal tax rate is 35%, and its cost of capital is 10%.

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values.

Assignment Guidelines

• Using the information in the assignment description:
• • Prepare a statement showing the incremental cash flows for this project over an 8-year period.
  • Calculate the payback period (P/B) and the net present value (NPV) for the project.
  • Answer the following questions based on your P/B and NPV calculations: