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4. A company is considering a five-year project. During the project's life, the company expects to sell 150 units annually at a unit price
4. A company is considering a five-year project. During the project's life, the company expects to sell 150 units annually at a unit price of $25,000. Variable cost per unit is $18,000 and fixed costs total $250,000 per year. Start-up costs include $5,000,000 of manufacturing equipment and 1,000,000 in net working capital, which will be recovered at the end of the project. The manufacturing equipment will belong to CCA Class 7, which has a CCA rate of 15%. At the end of the project's life, the manufacturing equipment will be sold for an estimated $1,500,000. The company pays taxes at a 38% rate and uses a 12% discount rate on projects.
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