QUESTION 23 Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding you

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Question 23 Your Firm Manufactures A Generic Low Cost Product To Be More Competitive You Are Considering Expanding You 1 (35.43 KiB) Viewed 39 times

QUESTION 23 Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your product line with a new premium version of your product. Below are the details. Cost of new equipment: $80,000 • Installation cost of equipment: $40,000 Life of equipment: 5 years, Straight line depreciation • Expected sales: $170,000 per year • Expected reduction in sales of generic product as customers shift to the new line: $10,000 per year Raw material cost: $90,000 per year New worker salary: $20,000 per year • Required Net working capital over the life of the project: $20,000 • Expected Salvage value of equipment at the end of 5 year: $30,000 Tax rate: 35%. Assuming a WACC of 13%, what is this project's NPV? O a.-5,068 b. 1,610 O c. 8,870 O d. 16,742 Oe. 25,294