you just discovered that there is a market for hypothetical mini plastic and this market will...

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Finance

you just discovered that there is a market for hypothetical miniplastic and this market will last 3 years. you also have thefollowing
project to manufacture them with the following details:
Sales price = $5 per unit
Number of unit produced and soldper annum = 10,000
Variable cost = $3 per unit
Fixed cost = $5000 per annum
intial outlay = $ 21000
Depreciation = straght-line
working capital= 20% of annual sales
tax rate is 34%
required rate is 34%
required rate of returb = 20%
is this project worth undertaking?

Answer & Explanation Solved by verified expert

4.3 Ratings (831 Votes)

Particulars Year 0 Year1 Year2 Year3 Initial Investment 1 21000 Depreciation Straight Line Method 2100037000 2100037000 2100037000 Depreciation Tax Shield TaxRateDepreciation2 7000034 2380 7000034 See Answer

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Transcribed Image Text

you just discovered that there is a market for hypothetical miniplastic and this market will last 3 years. you also have thefollowingproject to manufacture them with the following details:Sales price = $5 per unitNumber of unit produced and soldper annum = 10,000Variable cost = $3 per unitFixed cost = $5000 per annumintial outlay = $ 21000Depreciation = straght-lineworking capital= 20% of annual salestax rate is 34%required rate is 34%required rate of returb = 20%is this project worth undertaking?