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Lyra is considering adding a new item to her company's line of products . The machine required to manufacture the item costs $2000000 , and
Lyra is considering adding a new item to her company's line of products . The machine required to manufacture the item costs $2000000 , and it depreciates straight-line over 4 years. The new item would require a $300000 increase in inventory and a $150000 increase in accounts payable . She plans to market the items for four years and then sell the machine for $400000 . She expects to sell 20000 items per year at a price of $300. She expects manufacturing costs to be $220 per item and the fixed cost to be $300000 per year. If the tax rate is 38 % and her weighted average cost of capital is 8% per year, what is the net present value of selling the new item?
A.1,253,409
B. 1,044,507
C. -1,441,420
D. -1,044,507
E. 1,441,420
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