What is the projects initial outlay?
Should the project be accepted why or why not?
New Caledonia Problem
35% tax bracket
12% discount rate
Cost of new plant $9,000,000.00
Shipping and $350,000.00
Sales:
Year Sales
1 125,000 units
2 140,000 units
3 190,000 units
4 150,000 units
5 100,000 units
Sales price per unit - $550 each year’s 1-4 and $450 year 5
Variable cost per unit - $210
Annual fixed costs - $235,000