Answered step by step
Verified Expert Solution
Question
1 Approved Answer
DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is
- DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $10,000. Furthermore, the building where the widgets will be manufactured was refurbished last year at a cost of $10,000. Sales are expected to be $225,000 per year. Cost of goods sold will be 60% of sales. At the beginning of the project, an increase in net working capital of $10,000 is required. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $20,000. The marginal tax rate is 40% and DSSS Corporations appropriate discount rate is 15%. Assume the equipment is fully depreciated at the end of the third year. What is the initial investment outlay for this project?
a. | $125,000 |
b. | $135,000 |
c. | $145,000 |
d. | $155,000 |
Please solve with the financial calculator :) Thank you!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started