Projected annual sales of a LED keychain are projected to be 25,00025,00025,000 USD the first year and increase by 10,00010,00010,000 USD per year until 55,00055,00055,000 USD are sold during the fourth year. Sales are then predicted to decrease by 5,0005,0005,000 USD per year in the fifth year and each year thereafter until 25,00025,00025,000 USD are sold in the tenth year. Firm is going to purchase manufacturing equipment costing 100,000100,000100,000 USD with an estimated salvage value of 20,00020,00020,000 USD at the end of 10 years. The variable manufacturing cost per unit is 0.80.80.8 USD. If the interest rate is 9%9\%9%, what is the Present Equivalent cost for a 10-year production period?
Projected annual sales of a LED keychain are projected to be 25,00025,00025,000 USD the first year and increase by 10,00010,00010,000 USD per year until 55,00055,00055,000 USD are sold during the fourth year. Sales are then predicted to decrease by 5,0005,0005,000 USD per year in the fifth year and each year thereafter until 25,00025,00025,000 USD are sold in the tenth year. Firm is going to purchase manufacturing equipment costing 100,000100,000100,000 USD with an estimated salvage value of 20,00020,00020,000 USD at the end of 10 years. The variable manufacturing cost per unit is 0.80.80.8 USD. If the interest rate is 9%9\%9%, what is the Present Equivalent cost for a 10-year production period?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 2MC
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Projected annual sales of a LED keychain are projected to be 25,00025,00025,000 USD the first year and increase by 10,00010,00010,000 USD per year until 55,00055,00055,000 USD are sold during the fourth year. Sales are then predicted to decrease by 5,0005,0005,000 USD per year in the fifth year and each year thereafter until 25,00025,00025,000 USD are sold in the tenth year. Firm is going to purchase manufacturing equipment costing 100,000100,000100,000 USD with an estimated salvage value of 20,00020,00020,000 USD at the end of 10 years. The variable manufacturing cost per unit is 0.80.80.8 USD. If the interest rate is 9%9\%9%, what is the Present Equivalent cost for a 10-year production period?
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