Hi-tech Inc. is investing in a new production line to manufacture their newest high volume consumer product. Design costs for the past three years, leading up to production have been $0.75 million per year. Today production machinery totaling $3.65 million is being purchased to equip the new line. Operating and maintenance expenses will total $50,000 per year, and material and overhead costs will be $1.75 million annually. The new line will operates for 7 years, at which time equipment will be sold at 10% of purchase price. Revenue from the new product is expected to be $2.0 million the first year, increasing by $0.5 million per year for the next 4 years, and then decreasing by $0.75 million in year 6 and 7. HiTech has asked you to create a cash flow table and diagram.

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Chapter 2, Problem 79P

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Hi-tech Inc. is investing in a new production line to manufacture their newest high volume consumer product. Design costs for the past three years, leading up to production have been $0.75 million per year. Today production machinery totaling $3.65 million is being purchased to equip the new line. Operating and maintenance expenses will total $50,000 per year, and material and overhead costs will be $1.75 million annually. The new line will operates for 7 years, at which time equipment will be sold at 10% of purchase price. Revenue from the new product is expected to be $2.0 million the first year, increasing by $0.5 million per year for the next 4 years, and then decreasing by $0.75 million in year 6 and 7. HiTech has asked you to create a cash flow table and diagram.

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Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer.State the condition for a consumer's utility maximizing choice and illustrate graphically.

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