The U.S. Mint is considering replacing Kennedy on the 50-cent piece. Instead, they feel it would be
Question:
The U.S. Mint is considering replacing Kennedy on the 50-cent piece. Instead, they feel it would be more appropriate to have 50-cent himself, Curtis Jackson, pictured on the coin. They will also replace “In God We Trust” with “Get rich or die tryin”. This will be a limited run, only lasting three years. The mint will incur considerable upfront costs of new engraving and stamping equipment. They will have to pay their contract engravers an additional $50,000 of overtime now to produce the masters for the new coin. They will purchase new stamping equipment valued at $75,000. This equipment will be depreciated to $40,000 over the 3-year life of the project and then sold for $40,000. It costs the mint about $0.10 to produce each 50-cent piece. They believe that the new design will attract the attention of a lot of collectors who will buy 300,000 additional coins (for $0.50 apiece) from the mint each year than they otherwise would have. This belief is bolstered by a $25,000 marketing survey just completed. Finally, the mint will incur additional working capital costs in the amount of $20,000 immediately. There will be no net change in the working capital until year 3, at which point it will go back down by $20,000. The Mint’s discount rate is 10%, and it pays taxes of 34% on profits; Is this a good idea?
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old