Forever & more, Inc. recently hired a consultant to analyze the potential market growth as well as
Question:
Forever & more, Inc. recently hired a consultant to analyze the potential market growth as well as the pros' and cons of expanding into the sale of health supplements to increase a persons longevity. The fee for the consultant was $25,000 The project requires an initial fixed asset investment (equipment) of $300,000 which will be depreciated in a straight-line manner to zero over the 3-year life of the project. You can sell the equipment at the end of the 3 years for $50,000. The NWC investment is $40,000. The product line is expected to generate sales of 65,500 units per year. Sales price per unit is expected to be $4. Variable costs are $2.00 per unit and fixed costs are $35,000 per year. If the tax rate is 35%and the company's required rate of return is 10% Should the company go forward with this project? Why? Show the four steps that we generated in class and then use at least 3 decision rules to answer the question: Should you invest in this project and why?
Intermediate Microeconomics and Its Application
ISBN: 978-0324599107
11th edition
Authors: walter nicholson, christopher snyder