Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS? system: annual sales of 47,000 units at $17 a? unit, production costs at 38% of sales? price, annual fixed costs for production at $190,000.
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 ?$1,440,000 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 10?%.