Constructing a plant to manufacture a proposed new product

Reference no: EM13689377

A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, the equipment costs $250,000, and $100,000 additional working capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years, at which time the land can be sold for $400,000, the building for $350,000, and equipment for $50,000. All of the working capital would be recovered at the EOY 10. The annual expenses for labor, materials, and all other items are estimated to total $475,000. if the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Use the AW method (5.5)

Reference no: EM13689377

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