A manufacturing company is thinking of launching a new product.The company expec

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A manufacturing company is thinking of launching a new product.The company expects to sell $950000 of the new product in thefirst year and $1500000 each year thereafter. Direct costsincluding labor and materials will be 45% of sales. Indirectincremental costs are estimated at $95000 a year. The projectrequires a new plant that will cost a total of $1500000 whichwill be a depreciated straight line over the next 5 years. The newline will also require an additional net investment in inventoryand receivables in the amount of $200000. Assume there is no needfor additional investment in building the land for the project. Thefirms marginal tax rate is 35% and its cost of capital is10%.

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