1. Acme Inc. is launching a new and improved widget, Widget3XM Having spent $100,000 to develop the new Widget, Acme is

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1 Acme Inc Is Launching A New And Improved Widget Widget3xm Having Spent 100 000 To Develop The New Widget Acme Is 1 (53.84 KiB) Viewed 21 times

1. Acme Inc. is launching a new and improved widget, Widget3XM Having spent $100,000 to develop the new Widget, Acme is now ready to consider launching production and sales. New equipment necessary to produce the revolutionary widget costs $8,000,000 fully installed and is expected to have $500,000 salvage value in 3 years. It will be depreciated on a straight-line basis ($2,500,000/y). The company expects to sell 1,000,000 units at a price of $5.00 per unit Variable cash costs of producing the widget are expected to be $1.00 per unit. The widget is expected to be replaced by a newer Widget4XM after 3 years. Production and sales of the widget will require the following net working capital balances 1 0 400,000 Time. Inventory A/R A/P NWC ANWC 500,000 450,000 250,000 2. 500.000 450,000 250.000 بها = = = 200.000 The company faces a 30% tax rate and based on the risk its cost of capital is estimated to be 11%. Should the company launch the new Widget3XM?