Your highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $100,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.
Your highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $100,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 12 percent, what is the
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.
Trending now
This is a popular solution!
Step by step
Solved in 1 steps
