Austins cell phone manufacturer wants to upgrade its product mix to encompass an exciting new feature on its cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled in order to complete this recommendation:

According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firms tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate.

Your boss understands the risks but asks you to explain the alternatives, including the the pros and cons of this project and make your recommendation(s).

A tA Unit selling price Unit variable cost Fixed costs Deprecation costs Expected sales $ 45 $ 25 $200,000 $ 35,000 10,000 units per year