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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
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 $ In the first years of
sales, their financial analyst expects the company to sell
approximately units each year, with an average selling
price of $ On average, the variable cost of making the
gloss would be $ per unit. The equipment is expected to last
years. Their alternative to purchasing the equipment is to
invest the money. Zena's cost of capital is
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 straightline depreciation to
spread the cost of the machine over years. They expect
the market value of the equipment to decrease by half
$ 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 $ In the first years of
sales, their financial analyst expects the company to sell
approximately units each year, with an average selling
price of $ On average, the variable cost of making the
gloss would be $ per unit. The equipment is expected to last
years. Their alternative to purchasing the equipment is to
invest the money. Zena's cost of capital is
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 straightline depreciation to
spread the cost of the machine over years. They expect
the market value of the equipment to decrease by half
$ 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 $ In the first years of
sales, their financial analyst expects the company to sell
approximately units each year, with an average selling
price of $ On average, the variable cost of making the
gloss would be $ per unit. The equipment is expected to last
years. Their alternative to purchasing the equipment is to
invest the money. Zena's cost of capital is
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 straightline depreciation to
spread the cost of the machine over years. They expect
the market value of the equipment to decrease by half
$ each year. Should how to find their economic
profit if they amortize.
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