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thank you Q5) Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to
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Q5) Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $141,613.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $64,209.00. The old equipment currently has no market value. The new equipment cost $81,805.00. The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $17,354.00. An increase in net working capital of $51,335.00 is also required for the life of the project. The corporation has a beta of 1.842, a tax rate of 35.57%, and a target capital structure consisting of 31.92% equity and 68.08% debt. Treasury securities have a yield of 1.82% and the expected return on the market is 7.35%. In addition, the company currently has outstanding bonds that have a yield to maturity of 4.96%Step by Step Solution
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