FIN 370 Capital Budgeting

FIN/370

Team Assignment - Chapter 10 - Capital Budgeting

[Note: This problem is similar to the Raymobile Scooters example in Table 10-7]

ABC Corporation is considering the introduction of a new product.

The project will last five years and then be terminated.

The company's marginal tax rate is 34%.

The company's cost of capital is 15%.

The cost of the new plant and equipment for the project is 7,900,000.

Shipping and Installation costs are 100,000.

Projected sales are:

Year Units Sold

1 40,000

2 90,000

3 110,000

4 50,000

5 30,000

Sales price per unit: 300 per unit in years 1-4, 260 per unit in year 5.

Variable cost per unit: 180 per unit.

Annual fixed costs: 200,000....

FIN 370

hemsworth

**Excerpt from file: **FIN370CapitalBudgeting FIN/370 TeamAssignmentChapter10Capital Budgeting [Note:ThisproblemissimilartotheRaymobileScootersexampleinTable107] ABCCorporationisconsideringtheintroductionofanewproduct. Theprojectwilllastfiveyearsandthenbeterminated. Thecompanysmarginaltaxrateis34%.

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