Glenn Corporation is considering the introduction of a new product, CS
CS was developed at an R&D cost of $M over past years
New machine to produce CS would cost $M
New machine lasts for years, with salvage value of $
New machine has a year useful life
CS need to be painted; this can be done using excess capacity of the painting machine, which currently runs at a cost of $regardless of how much it is used
Operating cost: $ per year
Sales: $ but cannibalization would lead existing sales of regular masks to decrease by $
Working Capital CS: $ needed over the life of the project
Tax rate:
Opportunity cost of capital:
Required: Glenn has hired you to help them. Should Glenn go ahead with the production of CSYou must support your answer.
