You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused capacity to start selling "BB" on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.6P
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Transcribed Image Text:You are considering adding a new software title to those published by your highly successful software
company. If you add the new product, it will use capacity on your disk duplicating machines that you
had planned on using for your flagship product, "Battlin' Bobby." You had planned on using the unused
capacity to start selling "BB" on the West coast in two years. You would eventually have had to
purchase additional duplicating machines 10 years from today, but using the capacity for your new
product will require moving this purchase up to 2 years from today. If the new machines will cost
$115,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of
capital is 16 percent, what is the opportunity cost associated with using the unused capacity for the
new product? (Negative amount should be indicated by a minus sign. Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Opportunity cost
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