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Regis International Corporation (RIC), a Denver based technology company, has been applying its expertise in microprocessor technology to develop a small computer specifically designed to
Regis International Corporation (RIC), a Denver based technology company, has been applying its expertise in microprocessor technology to develop a small computer specifically designed to control home appliances. Once programmed, the computer would automatically control the heating and air-conditioning system, hot water heater, and even small appliances such as coffee makers. By increasing the energy efficiency of a home, the appliance control computer can save on costs hence pay for itself in a few years. This effort has now reached the stage where a decision on whether or not to go forward with production must be made. RIC's marketing department plans to target sales of the appliance control computer to the owners of larger homes - the computer is cost effective only on homes with 2,000 or more square feet of heated/air-conditioned space. The marketing vice-president forecasts sales in 2018 to be $40 million and to increase by 6 percent per year. The engineering department has estimated that the firm would need a new manufacturing plant; this plant could be built and made ready for production in 1 year, once the "go" decision is made. The plant would require a 25-acre site, and RIC currently has an option to purchase a suitable tract of land for $1.2 million; the land option must be exercised on December 31 2016. Building construction would begin in early 2017 and would continue through the end of 2017. The building, which would fall into the MACRS 39-year class (ignore any half-year convention), would cost an estimated $8 million, payable on December 31 2017. The necessary manufacturing equipment would be installed late in 2017 and would be paid for on December 31,2017. The equipment, which would fall into the MACRS 7- year class, would have a cost of $6.5 million, including transportation, plus another $500,000 for installation. Regis International Corporation (RIC), a Denver based technology company, has been applying its expertise in microprocessor technology to develop a small computer specifically designed to control home appliances. Once programmed, the computer would automatically control the heating and air-conditioning system, hot water heater, and even small appliances such as coffee makers. By increasing the energy efficiency of a home, the appliance control computer can save on costs hence pay for itself in a few years. This effort has now reached the stage where a decision on whether or not to go forward with production must be made. RIC's marketing department plans to target sales of the appliance control computer to the owners of larger homes - the computer is cost effective only on homes with 2,000 or more square feet of heated/air-conditioned space. The marketing vice-president forecasts sales in 2018 to be $40 million and to increase by 6 percent per year. The engineering department has estimated that the firm would need a new manufacturing plant; this plant could be built and made ready for production in 1 year, once the "go" decision is made. The plant would require a 25-acre site, and RIC currently has an option to purchase a suitable tract of land for $1.2 million; the land option must be exercised on December 31 2016. Building construction would begin in early 2017 and would continue through the end of 2017. The building, which would fall into the MACRS 39-year class (ignore any half-year convention), would cost an estimated $8 million, payable on December 31 2017. The necessary manufacturing equipment would be installed late in 2017 and would be paid for on December 31,2017. The equipment, which would fall into the MACRS 7- year class, would have a cost of $6.5 million, including transportation, plus another $500,000 for installation
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