(35 points) The Mowbo $600,000 on new equipment and tooling. The new product lin
ID: 1140404 • Letter: #
Question
(35 points) The Mowbo $600,000 on new equipment and tooling. The new product line is expected to sei year for five years. Each unit will generate $180 in gross profit. At the end equipment will be sold for an estimated salvage value of $120,000. The Mowbot company evaluates projects using a MARR of 18%. Use present wo show whether this is a viable project. t company wants to add a new product line. This will require spending of five years, th Show the equivalence formula(s) you use as well as your final solution.Explanation / Answer
Initial investment = $600000
Annual gross profit = 1200*180 = $216000
Time = 5 year
Salvage benefits = $120000
R = 18%
Present worth of the project = present worth of the annual gross profits + present worth of the salvage benefits – initial investment
Present worth of the project = 216000*(1-1/(1+ R)^n)/R + 120000/(1+R)^n - 600000
Present worth of the project = 216000*(1-1/(1+18%)^5)/.18 + 120000/(1+18%)^5 – 600000
Present worth of the project = 127922.04 or $127922
Since the net present worth of the project is positive that is $127922, so project is viable and it should be done.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.