(Answered) Your firm is considering a new product development an

Management Studies

Your firm is considering a new product development. an outlay of $90,000 is required for equipment, and an additional net working capital of $5000 is required. The project is expected to have a 4 year life, and th equipement will be depreciated on a straight line basis to a $10,000 book value. Producing the new product will reduce current manufacturing expenses by $15,000 annually and increase earnings (revenue) before depreciation and taxes by $18,000 annually. Stanton's marginal tax rate is 40 percent. Stanton expects the equipment will have a marekt salvage value of $10,000 at the end of 4 years

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