Management's best guess is that it will be able to produce and sell 2,400 units of QM-30 each year. The contribution margin form the sale of QM-30 will be $24 per unit. To produce and distribute the new product, the company must incur $15,000 in additional fixed production and marketing costs each year. Although managements has no historical data on which to base its estimate, the after-tax net cash inflows for each year are expected to be normally distributed, which means that management's best guess estimates of the annual normally distributed, which means that management's best guess estimates of the annual cash inflows are also the expected values of the annual cash inflows. The expected value of annual pretax cash inflows net of cash outflows is $42,600 [(2,400 units * $24 contribution margin)-$15,000 annual fixed cost]. Exhibit 22-7 illustrates the computation of the expected value of annual after-tax cash flows, based on an effective tax rate of 40 percent