Question

The Ashton Group is developing a new product line. Initial costs for the line are $68905. Annual utilities will be $30004. The company plans to concentrate on marketing for the first 4 years at a cost of $13990 per year.

Profits are anticipated to be zero for the first few years. It is estimated the product line will finally have a profit of $481206 at the end of year 6 and profits will continue to increase by 18% each subsequent year.

The new product line will require 5 employees for the first 7 years. The company will then hire 5 additional employees for the remainder of the product line lifespan.

Employees are paid an average of $53365 per year. Using a lifespan of 18 years and a nominal annual interest rate of 4% compounded annually, what is the equivalent uniform annual worth of the new product line?

Notes:

Count the years carefully when calculating employee expense after the additional employees are hired.

Count the years carefully when calculating the number of years of profit.