Maker of gourmet snack crackers is investing in product line

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Reference no: EM131721937

Quackers, Inc., maker of gourmet snack crackers, is investing in a new product line.

The new product line will require an additional machine at a cost of $281511. The machine will have a salvage value of $44950 at the end of 15 years. A minor overhaul of the machine will be required at the end of year 5 at a cost of $14381. A major overhaul will be required at the end of year 7 at a cost of $42774.

Annual labor expenses are anticipated to be $71338, increasing by 7% each year. Annual utility expenses are anticipated to be $42279, increasing by 13% each year.

Revenue is expected to start at $264728, increasing by $56489 each year until the end of year 5. After that, revenue is expected to be a uniform $1203087 per year until the end of year 15. (On your CFD, year 5 will be the last year of the increase. The first year of uniform revenue will be the next year.)

The company would like you to calculate the present worth of the investment, using a MARR of 7% and a lifespan of 15 years.

Hint: Count the years carefully when calculating the uniform revenue.

Round your answer. Do not use a dollar sign ("$"), any commas (",") or a decimal point (".").

Reference no: EM131721937

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