Recent research has made possible the development of a durable and reusable nano-sized sensing device capable of detecting both physical and chemical changes. The proposed uses include real-time manufacturing process control, optimizing human body functioning, as well as, other lucrative aims. Your company Advanced Sensor Technologies (AST) has just perfected a process for mass production. The following information has been compiled. AST's marketing department plans to initially target sales to manufacturers worldwide. They estimate that annual sales would be 200,000 units, if the device were priced at $650 per unit (dollars of the first operating year). To support the level of sales volume, AST would need a new state of the art manufacturing plant. Once the decision to "go" is made the plant could be built and ready for production within 4 years. AST would need a 20-acre tract of land that could be purchased for $1.8 million. If the decision were made, the land could be purchased on December 31, 2017. The building would cost a total of $4.5 million and is depreciated on a 39-year MACRS schedule. The first payment to the contractor is $1 million due on December 31, 2018 and the balance would be due upon completion on December 31, 2019 The required manufacturing equipment would be installed late in 2019 and would be paid for on December 31, 2019. AST would purchase the equipment at an estimated cost of $9 million, including transportation, plus a further $800,000 for installation. The equipment falls into the 7-year MACRS class. The project would require an initial investment in working capital of $2 million. This initial working capital investment would be made on December 31, 2019, and on December 31 of each following year, the net working capital would be increased by an amount equal to 20% of any sales increase expected during the coming year. The investments in working capital would be fully recovered at the ending project year Recent research has made possible the development of a durable and reusable nano-sized sensing device capable of detecting both physical and chemical changes. The proposed uses include real-time manufacturing process control, optimizing human body functioning, as well as, other lucrative aims. Your company Advanced Sensor Technologies (AST) has just perfected a process for mass production. The following information has been compiled. AST's marketing department plans to initially target sales to manufacturers worldwide. They estimate that annual sales would be 200,000 units, if the device were priced at $650 per unit (dollars of the first operating year). To support the level of sales volume, AST would need a new state of the art manufacturing plant. Once the decision to "go" is made the plant could be built and ready for production within 4 years. AST would need a 20-acre tract of land that could be purchased for $1.8 million. If the decision were made, the land could be purchased on December 31, 2017. The building would cost a total of $4.5 million and is depreciated on a 39-year MACRS schedule. The first payment to the contractor is $1 million due on December 31, 2018 and the balance would be due upon completion on December 31, 2019 The required manufacturing equipment would be installed late in 2019 and would be paid for on December 31, 2019. AST would purchase the equipment at an estimated cost of $9 million, including transportation, plus a further $800,000 for installation. The equipment falls into the 7-year MACRS class. The project would require an initial investment in working capital of $2 million. This initial working capital investment would be made on December 31, 2019, and on December 31 of each following year, the net working capital would be increased by an amount equal to 20% of any sales increase expected during the coming year. The investments in working capital would be fully recovered at the ending project year
