Question
Assume that your selected company is considering a potential project with a new product that is expected to sell for an average price of $250
Assume that your selected company is considering a potential project with a new product that is expected to sell for an average price of $250 per unit and the company expects it can sell 500,000 unit per year at this price for a period of five years. Launching this project will require purchase of a $5,500,000 equipment that has residual value in five years of $500,000 and adding $ 80,000 in working capital which is expected to be fully retrieved at the end of the project.Depreciation method: straight line (n = 5 years) Variable cost per unit: $150 4 Cash fixed costs per year $550 000 Discount rate: 9% Tax Rate: 25%
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