ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in year one and the number of widgets will increase by 3% each year. They will sell the widgets for $10 each and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5 year MACRS schedule(See Table 6.3 in the book). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%.

ABC Corp is considering a project to create new widgets. The project will last for 7 years They plan to sell 10,000 widgets in year one and the number of widgets will increase by 3% each year. They will sell the widgets for $10 each and the cost to produce the widgets will be $4 per unit. Fixed costs are expected to be $40,000. The project will require an initial capital investment of $100,000 which will be depreciated using a 5 year MACRS schedule(See Table 6.3 in the book). In year 7, the equipment can be salvaged for $10,000. Net Working Capital will be 5% of the next years projected sales. The tax rate is 21% and the Discount rate is 12%.

Name: ABC Corp is considering a project to create new widgets. The project
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Description: ABC Corp is considering a project to create new widgets. The project will last for 7 yearsThey plan to sell 10,000 widgets in year one and the number of widgets will increase by 3%each year. They will sell the widgets for $10 each and the cost to pr

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...

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