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Year 1 Revenue $60,000 2 45,000 3 30,000 4 10,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in

Year

1

Revenue

$60,000

2 45,000
3 30,000
4 10,000
Thereafter 0

Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.

a. What is the initial investment in the product? Remember working capital.

b.

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm

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