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Business, 06.05.2020 23:15 100113801

A company is considering constructing a plant to manufacture a proposed new product. The land costs $250 comma 000, the building costs $700 comma 000, the equipment costs $300 comma 000, and $150 comma 000 additional working capital is required. It is expected that the product will result in sales of $850 comma 000 per year for 11 years, at which time the land can be sold for $450 comma 000, the building for $300 comma 000, and the equipment for $60 comma 000. All of the working capital would be recovered at the EOY 11. The annual expenses for labor, materials, and all other items are estimated to total $500,000. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Use the AW method.

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