Phase 5 capital budget concept
A company is considering making a new bicycle. The company expects to sell 4,000 units of the bicycle each year for 5 years. Each bicycle is expected to sell for $400. The company’s tax rate is 30%. Fixed costs are $700,000 per year, and variable costs are $75 per bicycle. To make the bicycle, the company will purchase a machine that costs $1.5 million today. […]