Zena Cosmetics is considering investing in a new type of

equipment that would allow the company to produce bing

cherry lip gloss, which would be a new product in their make

up line. The equipment costs $$56,000.$ In the first $2$ years of

sales, their financial analyst expects the company to sell

approximately $1,350$ units each year, with an average selling

price of $$29.$ On average, the variable cost of making the

gloss would be $$5$ per unit. The equipment is expected to last

$2$ years. Their alternative to purchasing the equipment is to

invest the money. Zena's cost of capital is $7\%.$

a$)$ If Zena expenses the machine, what will be the economic

profit of this investment? Show your work for full credit.

b$)$ Suppose Zena cosmetics uses straight$-$line depreciation to

spread the cost of the machine over $2$ years. They expect

the market value of the equipment to decrease by half

$($$$28,000)$ each year. Should how to find their economic

profit if they amortize.Zena Cosmetics is considering investing in a new type of

equipment that would allow the company to produce bing

cherry lip gloss, which would be a new product in their make

up line. The equipment costs $$56,000.$ In the first $2$ years of

sales, their financial analyst expects the company to sell

approximately $1,350$ units each year, with an average selling

price of $$29.$ On average, the variable cost of making the

gloss would be $$5$ per unit. The equipment is expected to last

$2$ years. Their alternative to purchasing the equipment is to

invest the money. Zena's cost of capital is $7\%.$

a$)$ If Zena expenses the machine, what will be the economic

profit of this investment? Show your work for full credit.

b$)$ Suppose Zena cosmetics uses straight$-$line depreciation to

spread the cost of the machine over $2$ years. They expect

the market value of the equipment to decrease by half

$($$$28,000)$ each year. Should how to find their economic

profit if they amortize.Zena Cosmetics is considering investing in a new type of

equipment that would allow the company to produce bing

cherry lip gloss, which would be a new product in their make

up line. The equipment costs $$56,000.$ In the first $2$ years of

sales, their financial analyst expects the company to sell

approximately $1,350$ units each year, with an average selling

price of $$29.$ On average, the variable cost of making the

gloss would be $$5$ per unit. The equipment is expected to last

$2$ years. Their alternative to purchasing the equipment is to

invest the money. Zena's cost of capital is $7\%.$

a$)$ If Zena expenses the machine, what will be the economic

profit of this investment? Show your work for full credit.

b$)$ Suppose Zena cosmetics uses straight$-$line depreciation to

spread the cost of the machine over $2$ years. They expect

the market value of the equipment to decrease by half

$($$$28,000)$ each year. Should how to find their economic

profit if they amortize.