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The new-product department of Telephone Accessories, Inc. (TAI) has researched a new multipurpose charging station. Further development (depreciable) to have it ready to sell is estimated at $650,000. Marketing has estimated that it could be sold at a price of $66 and that 80,000 units could be sold each year (in all years). A marketing budget for this new product would need to be $2,000,000 in year 1 and $1,000,000 in the remaining years. A vendor has been found in China who would produce these at an estimated cost of $47.00 each. For this initial analysis, working capital can be ignored and the salvage value would be zero. Is this product financially feasible for the above financial estimates? Use a MARR of 15%. income and capital gains tax rate of 20%, a time horizon of 4 years and straight line depreciation?
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