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Sports Science International is considering launching a new sports drink Warrior - Ade. The estimated project life is three years due to the fierce competition
Sports Science International is considering launching a new sports drink WarriorAde. The estimated project life is three years due to the fierce competition in the sports drink market. The project requires an upfront investment of $ for new equipment. The salvage value of the new equipment is $ at the end of the third year. The company uses the straightline depreciation. Additionally, the company has estimated the following information:
The annual demand for the new sports drink is estimated to be bottles, bottles, and bottles, respectively, for the three years of the product life.
The unit price of the new sports drink is $ per bottle.
The cost of production inputs water and additives is $ per bottle.
The company needs to maintain working capital to support production and sales. The working capital balance requirements are $ $ and $ respectively, at the beginning of year at the end of year and at the end of year The working capital balance will then be recovered at the end of year
The company expects that the new equipment invested in will be sold at a price of $ at the end of year
The company faces a marginal tax rate of Assume that the companys EBIT generated from other divisions is greater than $ each year.
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