Assume alpha company is considering producing new widget

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Assume the alpha company is considering producing a new widget. the required machinery will cost 1,200,000 it will be depreciated using a 5-year macrs asset life. alpha has already spent 250,000 in renovations to make room for the new machinery(expensed in 1 year) apha expects to sell 150,000 widgets each year for the next 4 years at a 12 sale price per unit and a $5 varaable cash cost per unit. 20% of the sales will come from customers of alphas existing widget, which sells for $10 per unit and has a $6 varaible cash cost per unit. aplha will incur $60,000 in fixed cash operating costs each year. alpha expects to sell machinery at the end of year 4 for 150,000 the companies tax rate is 30% and relevant cost of capital is 20%

Reference no: EM131082904

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