The Company has the oppotunity to introduce a new product. The sales manager believes that the firm could sell 5,000 units per year at 14 per unit for 5 years. The production manager has determined that machinery costing 60,000 and having a 5 year life and no salvage value could be required. The machinery will have an annual fixed cash operating costs of 4,000. Variable cost per unit will be 8. Straight-line depreciation is to be used for both book and tax purposes. The tax rate is 40% and the firm's cost of capital is 14%. What is the Net Present Value of the Investment?
The Company has the oppotunity to introduce a new product. The sales manager believes that the firm could sell 5,000 units per year at 14 per unit for 5 years. The production manager has determined that machinery costing 60,000 and having a 5 year life and no salvage value could be required. The machinery will have an annual fixed cash operating costs of 4,000. Variable cost per unit will be 8. Straight-line depreciation is to be used for both book and tax purposes. The tax rate is 40% and the firm's cost of capital is 14%. What is the Net Present Value of the Investment?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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The Company has the oppotunity to introduce a new product. The sales manager believes that the firm could sell 5,000 units per year at 14 per unit for 5 years. The
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