Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

MadeTaylor Inc. manufactures financial calculators. The company is deciding whether to introduce a new calculator. this calculator will sell for $150. The company feels that

MadeTaylor Inc. manufactures financial calculators. The company is deciding whether to introduce a new calculator. this calculator will sell for $150. The company feels that the sales will be 10,000, 10,000, 10,000, 14,000, 14,000, and 14,000 units per year for the next 6 years. variable cost will be 15% of sales, and fixed cost are a $1,000,000.00 per year. The firm hired a marketing team to analyze the viability of the product and the marketing analysis cost $2,500,000.00. The company plans to use a vacant warehouse to manufacture and store the calculators. based on the recent appraisal. the warehouse and the property is worth 10 million on an after tax basis. if the company does not sell the property today then it will sell the property 6 years from today at the currently appraised value. this project will required an injection of networking capital at the onset of the project in the amount of $2 million dollars. this networking capital will be fully recovered at the end of the project. The firm will need to purchase some equipment in the amount of $3,800,000.00 to produce the new calculator. depreciate the equipment using a 7-year MACRS. The firm is able to sell the machine at the end of the project for a million dollars. The firm requires a 9% return on its investment and has a tax rate of 21%. calculate the opportunity cost of the project

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Risk Modeling Evaluation Handbook Rethinking Financial Risk Management Methodologies In The Global Capital Markets

Authors: Greg Gregoriou, Christian Hoppe, Carsten Wehn

1st Edition

0071663703, 978-0071663700

More Books

Students also viewed these Finance questions