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Assume no changes to the established product lines, no depreciation or amortization, tax rate is 21%, and selling price of the new product is set at $699.99/unit. Does the firm earn an economic profit? If so, how much? Hint: create a new income statement and dont forget interest payments made to the bank loan (use the Excel CUMIPMT formula)

3. Costs & EVA: You are the owner of a private company who uses only earnings to run the business. Your firm will launch a new product line starting 2021. The projected production is 10,000 units a month and is projected to incur the following costs: labor $125/unit, materials $45/unit, rent $250,000/month, marketing & advertising campaign $75,000 (total), and accounting & litigation services $25,000 (total). Your Firm, LLC Income Statement December 31, 2020 Net Sales $10,000,000.00 Cost of Sales $300,000.00 GROSS PROFIT $9,700,000.00 Operating Expenses: SG&A $270,000.00 Depreciation & Amortization $20,000.00 Total Operating Expenses $290,000.00 OPERATING INCOME $9,410,000.00 Other Income (Expense): Net Interest $0.00 Other Income $0.00 Total Other Income (Expense): $0.00 EARNINGS BEFORE PROVISION $9,410,000.00 FOR INCOME TAXES Provision for Income Taxes ($1,976,100.00) NET EARNINGS $7,433,900.00 Cost of Sales is composed of costs related to 1) direct material, 2) direct labor cost, 3) cost of storing products, and 4) overhead. SG&A Expense is composed of costs related to non-production expenses. Examples are 1) rent, 2) marketing & advertising services, 3) accounting & litigation services, 4) travel expenses, among others

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