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Glenn Corporation is considering the introduction of a new product, CS. ...

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Accounting

Glenn Corporation is considering the introduction of a new product, CS.
CS was developed at an R&D cost of $1M over past 3 years
New machine to produce CS would cost $2M
New machine lasts for 15 years, with salvage value of $50,000
New machine has a 10-year useful life
CS need to be painted; this can be done using excess capacity of the painting machine, which currently runs at a cost of $30,000(regardless of how much it is used)
Operating cost: $40,000 per year
Sales: $400,000, but cannibalization would lead existing sales of regular masks to decrease by $20,000
Working Capital (CS): $250,000 needed over the life of the project
Tax rate: 24%
Opportunity cost of capital: 10%.
Required: Glenn has hired you to help them. Should Glenn go ahead with the production of CS?You must support your answer.

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