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Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a

Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $850,000 capital investment and $50,000 shipping fee, and will be equally depreciated (straight-line) over its 4 year life. They believe they can salvage $250,000 for the equipment at the end of the project.Incremental sales are expected to be $1,000,000 annually for the 4 year period with cash expenses of 43% of sales. The company would also have to commit initial working capital to the project of $700,000. The company is subject to a marginal tax rate of 30% and investors require a 10% return on projects with a similar risk.

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