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2. We believe we can sell 90,000 home security devices per year at $150 per piece. The variable cost is $130 to manufacture. Fixed production
2. We believe we can sell 90,000 home security devices per year at $150 per piece. The variable cost is $130 to manufacture. Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero-salvage value after the 5-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working capital investment is necessary. The discount rate is 19%, and the tax rate is 35%. What do you think of the proposal
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