| ($ in thousands) |
|
|
|
| Marketing Research Costs, to date |
|
$ 20,000 |
|
|
| Initial cost of new equipment |
|
$ 300,000 |
|
|
| Licensing rights to use images (To be expensed for tax purposes at time 0) |
|
$ 350,000 |
|
|
| Expected life |
|
5 yrs |
|
|
| Salvage value |
|
0 |
|
|
| Depreciation method |
|
Straight-line over 5 years to 0 salvage value |
| Selling price of new equipment in 3 years* |
|
$ 130,000 |
|
|
| Incremental annual sales |
|
$ 800,000 |
|
|
| Incremental annual production costs |
|
$ 200,000 |
|
|
| Incremental annual selling |
|
|
|
|
| and administrative costs |
|
$ 80,000 |
|
|
| Current annual overhead costs |
|
$ 200,000 |
|
|
| Immediate advertising expenses for launch (To be expensed for tax purposes at tme 0) |
$ 190,000 |
|
|
| Tax rate |
|
40% |
|
|
| Working capital required, as a % of production costs |
|
7.50% |
(Needed at time 0.) |
| Minimum required rate of return |
|
10% |
|
|
| *The company must pay a 40% tax on the difference between the selling price and the asset's book value at time of sale. |
