Managerial Economics

posted by .

You are considering setting up a software development business. To set up the enterprise you will need to buy equipment costing $100,000. This equipment will be depreciated straight line over 5 years to a zero salvage value. Its market value at the end of the 5 years will be zero. You will need to rent space at $5,000 per year for the five years of the project. You will also need to hire 5 software engineers at $50,000 each, per year to work in this project. Marketing and selling costs will be $100,000 per year during the project. Materials costs are $20 per unit. You expect to sell 6,000 units of the product each year for the five years. If your tax rate is 40%, and you require a return of 12%, what is the minimum price you should charge per unit of the product?

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Finance

    What's the net present value (NPV) of this replacement project?
  2. Business

    What is the net present value (NPV) of this replacement project?
  3. Finance

    Delta Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight line method over 3 years. …
  4. Finance

    Delta Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight line method over 3 years. …
  5. Finance

    Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3 year tax life and would be fully depreciated by the straight line method over 3 years but it would have a positve pre-tax salvage value …
  6. Finance

    Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax net cash inflow of $30,000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be …
  7. managerial accounting

    Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases …
  8. finance

    Your firm is considering leasing a new radiographic device. The lease lasts for three years. The lease calls for four payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy …
  9. finacial managment

    Assignment Exercise: Inventory and Depreciation Concepts Assume that an organization purchased two pieces of equipment on April 1st (the first day of its fiscal year), as follows: (1) One laboratory equipment that cost $530,000 and …
  10. financial managment

    Inventory and Depreciation Concepts Assume that an organization purchased two pieces of equipment on April 1st (the first day of its fiscal year), as follows: (1) One laboratory equipment that cost $530,000 and has an expected life …

More Similar Questions