Problem: (continued) Factory Equipment Investment: To begin the analysis of the investment in new factory equipment, the finance staff of RDS met with various departments including production, engineering, and procurement to estimate the costs to acquire the factory equipment and prepare it for use. They identified acquisition and installation costs to be: Purchase Price Sales Tax Delivery Charges B Site Setup Costs Installation Costs Trial Runs $2,370,000 $118,500 $35,800 $16,900 $121,400 $87,400 The new factory equipment is expected to have a useful life of 10 years and an expected salvage value of $137,500 at the end of its life. The equipment qualifies as 5-Year Property for tax depreciation purposes. (See Course Outline #5 for MACR depreciation rates.) The finance staff met with product management and marketing as well as production, engineering, and procurement to estimate the incremental sales volume expected from the new equipment, the resulting incremental sales revenue, and the incremental costs to produce and support the sales. Based on their discussions, RDS expects incremental demand to increase over the first five years of the project. Marketing estimates that a decline in demand is likely during the second half of the project. To reduce the severity of the declining demand, RDS will need to lower its selling price and incur additional costs.