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A $ 6 M investment is considered by an electric bike manufacturing company to add a new production line for its new product, electric skateboards.
A $M investment is considered by an electric bike manufacturing company to add a new production line for its new product, electric skateboards. The company has commissioned an exploratory study of where to place the new production line and which type of equipment to use. There are three types of machines to choose from for the company to install on the new assembly line. The machines have zero salvage value at the end of year planning horizon. The company must select at least two alternatives from i Loan, ii Common Stocks, iii Preferred Stocks, and iv Retained Earnings to obtain the required amount of capital for the investment. Each of these capital sources could provide $M to support the project. The company is anticipating rapid product penetration and aggressive growth after addition of the new production line. The major question is to find out if the project is economically justified.
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