Engineering Economy
Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 7, Problem 35P
To determine

Calculate the minimum equivalent annual value.

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A company considers introducing a new newspaper. Its direct competitor charges $0.25 at retail. The fixed cost charges to be $350,000 per month. The variable cost is $0.08 per copy, but advertising revenues of $0.05 per paper will be generated. To print the morning paper, the publisher has to purchase a new printing press, which will cost $620,000. The press machine will be depreciated according to a seven-year MACRS class. The press machine will be used for 10 years, at which time its salvage value would be about $100,000. Assume 365 issues per year, a 27% tax rate, and a 13% MARR. How many copies per day must be sold to break even at a retail selling price of $0.20 per paper?
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Engineering Economy

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