LR Industries is considering the purchase of a new piece of equipment to meet the

increased demand for its Model XL-4 tennis racket. The equipment costs $100,000 plus

$5,000 for installation and shipping, the resulting increased production is expected to

require additional NWC of $25,000.

The new equipment that LR industries will purchase would be depreciated

using simplified straight-line method and is considered 10-year expected life.

The equipment is expected to enable the firm expand sales by $80,000 per year

with an increase in cash operating expenses amounting to 60% of the increase

in sales. The firm