# Because of the success of the new spicy sausages, Silvio's Sausage Factory has come up with another

## Question:

Because of the success of the new spicy sausages, Silvio\'s Sausage Factory has come up with another new line of sausages the impossible sausages. Silvio has already paid $75,000 for another marketing study to determine the viability of the product. It is belived that the new line of sausages will enerate sales for each year of: year 1 $625,000, Year 2 $650,000, Year 3 $700,000 and year 4 $750,000. The fixed costs associated with with the product will be 315,000 per year, and variable costs will amount to 22% of sales. The equipment necessary for production of the new sausages will cost $596,000 and will be depeciated to zero using straight line deprectiation over 4 years. At the end of the four years Silvio believe that equipment will have a salvage value of $45,000. islvio\'ss sausage paid 35% in taxes last year and has a required rate of return of 13%. No additional working capital is required.

What is the irr of the project