Lisowski Laptops is examining the possibility of manufacturing and selling a notebook computer that is compatible with both Pc’s and Macintosh…

Lisowski Laptops is examining the possibility of manufacturing and selling a notebook computer that is compatible with both Pc’s and Macintosh systems and that can receive television signals. Its estimated selling price is $2500. Variable costs (supplies and labor) will equal $1500 per unit, and fixed cost per year would approximate $200,000. Up-front investments in plant and equipment will total $270,000, which will be straight-line depreciated over three years. The initial working capital investment will be $100,000 and will rise proportionately with sales. Bill, the CEO forecast sales of the laptop will be 50,000 units the first year, 60,000 the second year and 45,000 the third year, at which time product life cycles would require closing down the production of the model. At that time, the market value of the project’s assets will be about $70,000. LL’s tax rate is 40 percent and its required return on projects such as this one is 17 percent. Should Lisowski Laptops offer the new computer?

SOLUTION:Calculation of Net Present Value:ParticularsInitial InvestmentWorking Capital Investment 0 1 2 3 $(270,000.00)$(100,000.00) Units to be soldSales RevenueLess: Variable CostsLess:…