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P 3 ( 5 points ) Terrific Toys, a large profitable producer of toys and games, is considering the introduction of a new toy called
P points Terrific Toys, a large profitable producer of toys and games, is considering the introduction of a new toy called Gooey Guck that it hopes will be a new fad. It is likely to be popular for three years, but after that, consumers will tire of the new toy. It forecasts that it can sell million units next year and million units in the second year, and million units in the third year.Machinery must be purchased immediately at a cost of $ million which can be depreciated for tax purposes straightline over three years After three years the machinery will be disposed and there will be no salvage value.The cost of manufacturing Gooey Guck will be $ per unit primarily labour and raw materials and they hope to sell it for $ per unit.The corporate tax rate is There is no inflation. The appropriate discount rate is What is the NPV of introducing Gooey Guck? Should they make the investment? Show all your work.
P points Terrific Toys, a large profitable producer of toys and games, is considering the introduction of a new toy called Gooey Guck that it hopes will be a new fad. It is likely to be popular for three years, but after that, consumers will tire of the new toy. It forecasts that it can sell million units next year and million units in the second year, and million units in the third year.Machinery must be purchased immediately at a cost of $ million which can be depreciated for tax purposes straightline over three years After three years the machinery will be disposed and there will be no salvage value.The cost of manufacturing Gooey Guck will be $ per unit primarily labour and raw materials and they hope to sell it for $ per unit.The corporate tax rate is There is no inflation. The appropriate discount rate is What is the NPV of introducing Gooey Guck? Should they make the investment? Show all your work.
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