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1 . The cost of the marketing test is $ 2 5 0 , 0 0 0 . 2 . The new product will be

1. The cost of the marketing test is $250,000.
2. The new product will be manufactured in a building owned by the company. If not
manufactured, the building would be sold for $150,000.
3. The cost of the machine is $100,000 and is expected to be used for 5 years, after which
it is expected to be sold for $30,000.
4. The price of a unit of production is $20, and it is expected to grow at a rate of 2% per
year.
5. The tax rate is 34%, and the production cost is $10 per unit, which is expected to grow
at a rate of 10% per year.
6. Depreciation is calculated using the Modified Accelerated Cost Recovery System.
7. Net working capital at the time of the investment is $10,000, and in subsequent years, it
is expected to be 10% of the total expected sales.
The marketing test concluded that the expected production levels for the next 5 years are: E(Quantity Demanded)={5,000; 8,000; 12,000; 10,000; 6,000} BASED ON THE INFORMATION ABOVE, FILL OUT THE UNKNOWN INFORMATION BELOW: Intial Investments
Salvage Value
Intial Revenue
Initial Exspenses
Inflation Rate
Discount Rate
Acct Rec. As Frac Of Sales
Inven. As Frac Of Expenses
Tax Rate

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