Should lisowski laptops offer the new computer

Reference no: EM13323956

Lisowski Laptops is examining the possibility of manufacturing and selling a notebook computer that is compatible with both PCs and Macintosh systems and that can receive television signals. Its estimated selling price is $2,500. Variable cost (supplies and labor) will equal $1,500 per unit, and fixed costs per year would approximate $200,000. Up-front investments in plant and equipment will total $270,000, which will be straight line depreciated over three years. The initial working capital investment will be $100,000 and will rise proportionately with sales. Bill, the CEO, forecasts sales of the laptop will be 50,000 units the first year, 60,000 units the second, and 45,000 units the third year, at which time product life cycles would require closing down production of the model.

At that time, the market value of the projects assets will be about $70,000. LL's Tax rate is 40 percent and its required return on projects such as this one is 17 percent. Should Lisowski Laptops offer the new computer?

Reference no: EM13323956

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