Tamworth Limited is considering embarking on a new project
Tamworth Limited is considering embarking on a new project. The company has a 30% tax rate and 15% required rate of return. The project involves the introduction of a new product. The project is expected to last five years and then, because this is somewhat of a fad product, it will be terminated. Cost of new plant and equipment : $9,900,000 Shipping and installation costs : $100,000 Sales price per unit : $280/unit in years 1-4; $180/unit in year 5. Variable cost per unit : $140 per unit Annual fixed costs : $300,000 Predicted sales for the next five years: Year 1 2 3 4 5 Units sold (number) 70,000 100,000 140,000 70,000 60,000…
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