Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS? system: annual sales of 47,000 units at $16 a? unit, production costs at 37?% of sales? price, annual fixed costs for production at $210,000. The company tax rate is 40?%. What is the annual operating cash flow of the new GPS?system? Should Grady Precision Measurement Tools add the GPS system to its set of? products? The initial investment is $1,430,000 for manufacturing? equipment, which will be depreciated over six years? (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 11?%.
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