PROBLEM 10.5 A cosmetic company is considering to introduce a new lotion which is useful both in winters and summers. The manufacturing equipment will cost *560,000. The expected life of the equipment is 8 years. The company is thinking of selling the lotion in a single standard pack of 50 grams at 12 each pack. It is estimated that variable cost per pack would be 6 and annual fixed cost, *450,000. Fixed cost includes (straight- line) depreciation of 70,000 and allocated overheads of *30,000. The company expects to sell 100,000 packs of the lotion each year. Assume that the tax rate is 45 per cent and straight-line depreciation is allowed for tax purposes. If the opportunity cost of capital is 12 per cent, should the company manufacture the lotion? Also calculate the time-adjusted break-even point.