The Zuber Bottle Company manufactures bottles for beer producers. Its current production capacity is

$20$ million bottles per year, which matches its current sales. The company, though, expects sales to increase

to $22$ million next year. Further, a market research company they hired has estimated that with an annual

$$1$ million advertising and promotion campaign conducted over the next three years $($that could be

launched one year from the present$),$ their sales could reach $24$ million next year, $26$ million the year after,

and then $29$ million per year for the foreseeable future.

To meet potential demand, Zuber is considering a capital expansion project. The expansion project

consists of the following:

$$4,000,000$ equipment cost

Zero capitalized installation cost

$$500,000$ expensed cost

Capitalized expenses would be depreciated over $10$ years to a book value of zero.

$$100,000$ change in working capital

The facility is expected to produce for $10$ years.

Salvage value minus removal cost equal zero.

Price of Zuber bottle $$0\mathrm{.}612/$bottle

AVC of Zuber bottle is $$\frac{0\mathrm{.}387}{?}$ bottle

Operating profit margin $=m=P-$AVC$=$$$.\frac{225}{?}$ bottle

Tax Rate $=0\mathrm{.}4$

Cost of Capital $=0\mathrm{.}12$

COMPLETE:

Suppose Zuber's marketing department estimates that the demand for their bottles is relatively inelastic and as a

result the department estimates that by increasing the price of a bottle by $$\frac{0\mathrm{.}017}{?}$ bottle from $$\frac{0\mathrm{.}612}{?}$ bottle to

$$\frac{0\mathrm{.}629}{?}$ bottle demand will stay at $20$ million bottles. Given this information, what should Zuber do$?$