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As the finance manager of a company, you are presented with the following project. The company is considering the purchase of a new piece of
As the finance manager of a company, you are presented with the following project. The company is considering the purchase of a new piece of equipment which would cost $200,000. This equipment will have a four-year useful life and have a salvage value of $0 at the end of the four-year period. The project life is also 4-year. It is estimated that - the incremental overhead for running the equipment will be $20,000 per year. - they can sell the shelves for $25 each. - the cost of sales is $15 per shelf. For simplicity, we assume the levels of net working capital are zeros during the whole project life. The company has a 30% marginal tax rate and a cost of capital of 15%. Question: How many shelves the company needs to sell such that it will achieve an economic break-even
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