You are considering setting up a software development business.Â Â To set up the enterprise you will...

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Finance

You are considering setting up a software developmentbusiness.Â Â To set up the enterprise you will need to buyequipment costing $100,000. This equipment will be depreciatedstraight line over 5 years to a zero salvage value. Its marketvalue at the end of the 5 years will be zero.Â Â You willneed to rent space at $5,000 per year for the five years of theproject. You will also need to hire 5 software engineers at $50,000each, per year to work in this project. Marketing and selling costswill be $100,000 per year during the project. Materials costs are$20 per unit. You expect to sell 6,000 units of the product eachyear for the five years. If your tax rate is 40%, and you require areturn of 12%, what is the minimum price you should charge per unitof the product?

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Year 1 2 3 4 5 Sales 6000 units 8583 per unit 515000 515000 515000 515000 515000 Materials costs 6000 units 20 per unit 120000 120000 120000 120000 120000 See Answer

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