Constructing plant to manufacture proposed new product

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Reference no: EM131388911

A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $550,000, the equipment costs $250,000, and $150,000 additional working capital is required. It is expected that the product will result in sales of $650,000 per year for 11 years, at which time the land can be sold for $450,000, the building for $350,000, and the equipment for $50,000. All of the working capital would be recovered at the EOY 11. The annual expenses for? labor, materials, and all other items are estimated to total $525,000. If the company requires a MARR of 17% per year on projects of comparable? risk, determine if it should invest in the new product line. Use the AW method.

Reference no: EM131388911

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