Question
Pappys potato has come up with a new product, the Potato Pet. Pappys to determine the viability of the product. It is felt that Potato
Pappys potato has come up with a new product, the Potato Pet. Pappys to determine the viability of the product. It is felt that Potato Pet can per year. The associated with this will be per year, and will amount to . The necessary for production of the Potato Pets will and will be depreciated in a straight-line manner for the years of the product life. This is the only for the production. Pappys is in a bracket and has a . Calculate the payback period, NPV, and IRR.
n Pappys potato has come up with a new product, the Potato Pet. Pappys paid $125,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet can generate sales of $555,000 per year. The fixed costs associated with this will be $190,000 per year, and variable costs will amount to 20% of sales. The equipment necessary for production of the Potato Pets will cost $560,000 and will be depreciated in a straight-line manner for the four years of the product life. This is the only initial cost for the production. Pappys is in a 40 percent tax bracket and has a required return of 14 percent. Calculate the payback period, NPV, and IRR.
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