question archive A company is considering launching a new product with the following specifications: •Lifespan of three years •$80,000 initial investment in equipment •$50,000 in revenue for the first year •$85,000 in revenue for the second year •$135,000 in revenue for the third year •Tax rate of 24% •Costs associated with the product of $70,000 each year, including depreciation of $20,000 annually •Required taking out a new loan for $60,000, at 7% interest; interest expense is in addition to the other costs previously mentioned •Loan will be repaid in full at the end of the product's life cycle •Due to conditions imposed by the bank to secure financing, the company must keep a minimum level of inventory of $15,000 •Required rate of return is 15% •Company previously spent $15,000 on a market analysis to evaluate customer product preferences Would you advise the company to launch the aforementioned product and why or why not? (short answer) Include calculations to support your answers
A company is considering launching a new product with the following specifications: •Lifespan of three years •$80,000 initial investment in equipment •$50,000 in revenue for the first year •$85,000 in revenue for the second year •$135,000 in revenue for the third year •Tax rate of 24% •Costs associated with the product of $70,000 each year, including depreciation of $20,000 annually •Required taking out a new loan for $60,000, at 7% interest; interest expense is in addition to the other costs previously mentioned •Loan will be repaid in full at the end of the product's life cycle •Due to conditions imposed by the bank to secure financing, the company must keep a minimum level of inventory of $15,000 •Required rate of return is 15% •Company previously spent $15,000 on a market analysis to evaluate customer product preferences Would you advise the company to launch the aforementioned product and why or why not? (short answer) Include calculations to support your answers
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A company is considering launching a new product with the following specifications: •Lifespan of three years •$80,000 initial investment in equipment •$50,000 in revenue for the first year •$85,000 in revenue for the second year •$135,000 in revenue for the third year •Tax rate of 24% •Costs associated with the product of $70,000 each year, including depreciation of $20,000 annually •Required taking out a new loan for $60,000, at 7% interest; interest expense is in addition to the other costs previously mentioned •Loan will be repaid in full at the end of the product's life cycle •Due to conditions imposed by the bank to secure financing, the company must keep a minimum level of inventory of $15,000 •Required rate of return is 15% •Company previously spent $15,000 on a market analysis to evaluate customer product preferences Would you advise the company to launch the aforementioned product and why or why not? (short answer) Include calculations to support your answers.
