Question: You are considering adding a new software title to those
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to two years from today. If the new machines will cost $100,000 and will be depreciated straight-line over a five-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product?
Answer to relevant QuestionsYou are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in ...Compute the NPV statistic for Project Y and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12percent. Compute the IRR statistic for project F and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12percent.Use the discounted payback decision rule to evaluate this project; should it be accepted orrejected?Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and ...
Post your question