7. Your company is considering the introduction of a new product line. The initial investmentrequired for this project is $500,000, and annual maintenance costs are anticipated to be $35,000.Annual operating cost will be in direct proportion to the level of production at $8.50 per unit, andeach unit of product can be sold for $50.00. If the project has a life of 7 years, what is theminimum annual production level for which this project is economically viable? Work thisproblem on an after-tax basis. Assume 5-year SL depreciation (SV5=0), MV7 = 0, an effectiveincome tax rate of 40%, and an after-tax MARR of 10% per year.

let x be the annual production depriciation per year = 35000/5 = 7000 cash flow per year(1-5)…

Answered: 7. Your company is considering the…

Marketing

20th Edition

ISBN:9780357033791

Author:Pride, William M

Publisher:Pride, William M

Chapter19: Pricing Concepts

Section: Chapter Questions

Problem 6DRQ

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