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Subject
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Description
A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plant that will cost a total of $1,000,000, which will be a depreciated straight line over the next 5 years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000. <br />
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Assume there is no need for additional investment in building the land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%. <br />
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To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values. <br />
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Published By
tech
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Created Date
11/2/2010
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Expired Date
11/17/2020
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Status
Closed
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Offers
0.00
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