Question

Question 1 0.7 pts The Ashton Group is developing a new product line. Initial costs for the line are $87,985. Annual utilities will be $34,193. The company plans to concentrate on marketing for the first 4 years at a cost of $13,812 per year. Profits are anticipated to be zero for the first few years. It is estimated the product line will finally have a profit of $466,925 at the end of year 5 and profits will continue to increase by 19% each subsequent year. The new product line will require 8 employees for the first 9 years. The company will then hire 3 additional employees for the remainder of the product line lifespan. Employees are paid an average of $57,263 per year. Using a lifespan of 21 years and a nominal annual interest rate of 2% compounded annually, what is the equivalent uniform annual worth of the new product line? Notes: • Count the years carefully when calculating employee expense after the additional employees are hired. • Count the years carefully when calculating the number of years of profit. Enter your answer as 12345 Round your answer. Do not use a dollar sign ("$"), any commas (")"), or a decimal point (":").

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Answer 1

Initial Cost	87985		NPV	=	sum of PV of cash flows
annual utilities	34193			=	32196989.42
marketing cost	13812	pa
marketing period	4	years	Annual worth of project	=	interest rate*NPV/[1-{1/(1+interest rate)^21}]
Profit in 5th years	466925			=	1892693
PROFIT % INCREASE	19%
Employees for 9 years	8
Employees for next 12 years	11
Employee cost	57263	pa
annual INTEREST RATE	2%	pa
Years	Initial Cost	Annual utilities	Marketing cost	Employee cost	Revenue (Profit+utility cost+employee cost)	Profit	Cash flow (revenue-employee cost- marketing cost- utilities- initial cost	PV @ 2%
1	87985	34193	13812	458104	492297	0	-101797	-99801
2		34193	13812	458104	492297	0	-13812	-13276
3		34193	13812	458104	492297	0	-13812	-13015
4		34193	13812	458104	492297	0	-13812	-12760
5		34193	0	458104	959222	466925	466925	422908
6		34193	0	458104	1047938	555641	555641	493393
7		34193	0	458104	1153509	661212	661212	575625
8		34193	0	458104	1279140	786843	786843	671563
9		34193	0	458104	1428640	936343	936343	783490
10		34193	0	629893	1778334	1114248	1114248	914072
11		34193	0	629893	1990041	1325955	1325955	1066417
12		34193	0	629893	2241973	1577887	1577887	1244153
13		34193	0	629893	2541771	1877685	1877685	1451512
14		34193	0	629893	2898532	2234446	2234446	1693430
15		34193	0	629893	3323076	2658990	2658990	1975669
16		34193	0	629893	3828284	3164198	3164198	2304947
17		34193	0	629893	4429482	3765396	3765396	2689105
18		34193	0	629893	5144907	4480821	4480821	3137289
19		34193	0	629893	5996263	5332177	5332177	3660171
20		34193	0	629893	7009377	6345291	6345291	4270199
21		34193	0	629893	8214982	7550896	7550896	4981899