Use the Information for the Question(s)below

question 81

Essay

Use the information for the question(s)below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a manufacturing cost of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts.It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash,4% of its annual sales in accounts receivable,9% of its annual sales in inventory,and 6% of its annual sales in accounts payable.The firm is in the 21% tax bracket,and has a cost of capital of 10%.
-Construct a simple income statement showing the incremental EBIT and the incremental unlevered net income for all three years of the Sisyphean Corporation's project.

---

Definitions:

Problem Solving

The analytical process of finding solutions to difficult or complex issues, usually involving systematic steps or methods.

Projective Technique

The projective technique involves showing an individual an ambiguous stimulus, such as an inkblot or a fuzzy picture, and then asking what he or she “sees.”

Trained Clinician

A professional who has completed formal education and training in a clinical field, such as psychology, medicine, or counseling, capable of diagnosing and treating patients.

Personality Traits

Enduring characteristics or qualities that define an individual’s behavior in various situations.