Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company is considering the opportunity to invest into a new 8-year project: manufacturing and selling remote-controlled tree houses. $320,000 would need to be spent

image text in transcribed

A company is considering the opportunity to invest into a new 8-year project: manufacturing and selling remote-controlled tree houses. $320,000 would need to be spent upfront to cover the cost of buying the necessary production equipment, which will be depreciating at a constant rate each year over its 8-year economic life. The equipment will be worthless when the project ends. Additional information regarding the tree houses production: $3,300 in per-tree-house costs, a.k.a. variable cost of production $50,000 in total (i.e., not per tree house) annual fixed production costs Each sold tree house is estimated to bring the company $4,000. The tax rate of 28% applies to the company's taxable income each year. This project requires a 12% annual rate of return. Answer the following: If the company manufactures and sells [Select] tree houses each year, then it will break even in the "financial" sense. However, if the cost of buying the necessary production equipment turns out higher, then the required annual break-even number of sold tree houses would need to be [Select] A company is considering the opportunity to invest into a new 8-year project: manufacturing and selling remote-controlled tree houses. $320,000 would need to be spent upfront to cover the cost of buying the necessary production equipment, which will be depreciating at a constant rate each year over its 8-year economic life. The equipment will be worthless when the project ends. Additional information regarding the tree houses production: $3,300 in per-tree-house costs, a.k.a. variable cost of production $50,000 in total (i.e., not per tree house) annual fixed production costs Each sold tree house is estimated to bring the company $4,000. The tax rate of 28% applies to the company's taxable income each year. This project requires a 12% annual rate of return. Answer the following: If the company manufactures and sells [Select] tree houses each year, then it will break even in the "financial" sense. However, if the cost of buying the necessary production equipment turns out higher, then the required annual break-even number of sold tree houses would need to be [Select]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forecasting Revenue And Expenses For Small Business Using Statistical Analytics

Authors: Eleanor Winslow

1st Edition

0578797259, 978-0578797250

More Books

Students also viewed these Finance questions