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Fixed Costs
Variable Costs (% of Revenue)
Salvage value of New Equipment	$ 123,174.00
Marginal Tax Rate

The new Designer Shoes was expected to sell for $ 104 per unit and had projected sales of 4700 units in the first year, with a projected (Most-Likely scenario) 15.0 % growth rate per year for subsequent years. A total investment of $ 956,000 for new equipment was required. The equipment had fixed maintenance contracts of $ 280,612 per year with a salvage value of $ 123,174 and variable costs were 8 % of revenues. Balky also needed to consider both the Best-Case and Worst-Case scenarios in the analysis with growth rates of 25.00 % and 1.50 % respectively. The average corporate tax rate was 39 %.

The new equipment would be depreciated to zero using straight line depreciation. The new project required an increase in working capital of $ 128,520 and $ 21,848 of this increase would be offset with accounts payable.