DEF Corporation is considering a new product line. The company currently manufactures several lines of snow skiing apparel. The new products, insulated ski bikinis, are expected to generate sales of RM1 million per year for the next five years. They expect that during this five year period, they will lose about RM250,000 in sales on their existing lines of longer ski pants. The new line will require no additional equipment or space in the plant and can be produced in the same manner as the apparel products. The new project will, however, require that the company spend an additional RM80,000 per year on insurance in case customers sue for frostbite. Also, a new marketing director would be hired to oversee the line at RM45,000 per year in salary and benefits. Because of the different construction of the bikinis, an increase in inventory of 3,800 would be required initially. If the marginal tax rate is 30%, compute the incremental after tax cash flows for years 1-5. Select one: a. RM437,500 per year b. RM625,000 per year c. RM187,500 per year d. RM434,500 per year
DEF Corporation is considering a new product line. The company currently manufactures several lines of snow skiing apparel. The new products, insulated ski bikinis, are expected to generate sales of RM1 million per year for the next five years. They expect that during this five year period, they will lose about RM250,000 in sales on their existing lines of longer ski pants. The new line will require no additional equipment or space in the plant and can be produced in the same manner as the apparel products. The new project will, however, require that the company spend an additional RM80,000 per year on insurance in case customers sue for frostbite. Also, a new marketing director would be hired to oversee the line at RM45,000 per year in salary and benefits. Because of the different construction of the bikinis, an increase in inventory of 3,800 would be required initially. If the marginal tax rate is 30%, compute the incremental after tax cash flows for years 1-5.
Select one:
a. RM437,500 per year
b. RM625,000 per year
c. RM187,500 per year
d. RM434,500 per year
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