Should huffman systems add the new home alarm system

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Reference no: EM13273921

Huffman Systems has forecasted sales for its new home alarm systems to be 61,000 units per year at $38.50 per unit. The cost to produce each unit is expected to be about 42% of the sales price. The new product will have an additional $495,000 fixed costs each year, and the manufacturing equipment will have an initial cost of $2,430,000 and will be depreciated over eight years (straight-line). The company tax rate is 35%. What is the annual operating cash flow for the alarm systems if the projected sales and price per unit are constant over the next eight years? Should Huffman Systems add the new home alarm system to its set of products? The manufacturing equipment will be sold off a the end of the eight years for $210,000, and the cost of capital for this project is 14%.

Reference no: EM13273921

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