Question
Ok, I'm having trouble with this AW method... Can anyone help? Thanks! A company is considering constructing a plant to manufacture a proposed new product.
Ok, I'm having trouble with this AW method... Can anyone help? Thanks! A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $650,000, the equipment costs $300,000, and $80,000 additional working capital is required. It is expected that the product will result in sales of $850,000 per year for 99 years, at which time the land can be sold for $400,000,the building for $300,000, and the equipment for $40,000. All of the working capital would be recovered at the EOY 99. The annual expenses for labor, materials, and all other items are estimated to total $450,000. If the company requires a MARR of 13% per year on projects of comparable risk, determine if it should invest in the new product line. Use the AW method.
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