Bombardier: Capital Expenditure BOMBARDIE Bombardier, after spending $250,000 on a feasibility study, has determined that its customers will be willing to pay more money for the C Series model if Bombardier invests in a manufacturing technology upgrade that can enhance the safety of the engine. Bombardier realizes that the delays in the C Series program are likely costing them potential sales of the C Series jets. The feasibility study allowed management to better understand the implementation costs of the new technology as well as the potential payoff. Thus, they see the opportunity to make a short-term investment in the engine technology that will affect the next eight years of production in order to improve their overall offering to their customers Because the C Series production facilities are already covered in original cost estimates, no additional costs for production facilities are required. However, the required new machinery will cost $1,500,000 and will be subject to capital cost allowance depreciation (Asset Class 8, Manufacturing and processing equipment). When the C Series program expires after year eight, Bombardier executives figure there will be $283,116 in salvage on the equipment. Sales across the eight years of the C Series program are projected to be 20 units, 25 units, 30 units, 45 units, 60 units, 40 units, 40 units, and 40 units Bombardier expects that the price to their customers will start at an additional $100,000 with two per cent increases per year, as they wish to keep their prices competitive. Material costs of production are expected to be $64,000 per unit, growing at five per cent a year. Fixed costs per annum will amount to $750,000. The corporate tax rate Bombardier is subject to is 26.8 per cent, as of end of fiscal 2015