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You are considering opening a new soda restaurant in Cache Valley. In your estimate, this industry is well populated and very competitive. However, you have an exceptional machine that will allow you to produce sodas at the top end of the distribution. This machine costs $18,000 and will be depreciated to zero straight line over 5 years. Given your advantage you anticipate being able to sell each medium soda for $2.00. The cost for each of these drinks is $.80. You hired a marketing firm last year for $2,000 and they estimate that you can sell 6,000 medium drinks each month. Insurance will be $150 per month and the machine (due to the high-end nature) will require quarterly calibration at $500 each. You will need only a small space of 600 square feet, but space in Logan is becoming more expensive at will cost $21 per square foot per year. Utilities are estimated to be $.18 per square foot per month. You will be working pro bono for the new business, but you will be giving up your other part time income of $10,000 per year. Your estimate of other labor is that you will need 320 labor hours per month and due to the extremely tight labor market in Logan, Utah these positions will require a base pay of $10 per hour. In addition, you will be required to pay another 8% in payroll taxes. You anticipate working capital to be 10% of next years sales and to be recovered when you close the business in the 5th year. Also, the machine will have no market value at the end of the five-year project. You require a 15% return and taxes are 28%.

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