(solution) ABC Co. can invest $8 million in a new plant for producing

(solution) ABC Co. can invest $8 million in a new plant for producing

ABC Co. can invest $8 million in a new plant for producing invisible makeup. The plant has an expected life of 8 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $3 million a year, and variable costs are $1.50 per jar. The product will be priced at $3 per jar. The plant will be depreciated straight-line over five years to a salvage value of zero. The opportunity cost of capital is 10 percent, and the tax rate is 35 percent.