6. (3 points) Suppose Apple is considering expanding its product line to include the new electric car, iCar. The decision to expand will require $20,000,000,000 to build new plants, sales centers, and a nationwide sales team. The company estimates it will generate $300,000,000 in sales in the first 5 years, followed by sales of $1,500,000,000 for the next 7 years, and $2,000,000,000 for 13 years after that. However, during each year operating costs will be 30% of sales. In addition, every 10 years the firm will need to spend $65,000,000 to update its facilities. If the firm’s required rate of return is 16.50%, Compute the NPV of the project? Show your work. Round to the nearest $0.01. Show in Excel!!!

6. (3 points) Suppose Apple is considering expanding its product line to include the new electric car, iCar. The decision to expand will require $20,000,000,000 to build new plants, sales centers, and a nationwide sales team. The company estimates it will generate $300,000,000 in sales in the first 5 years, followed by sales of $1,500,000,000 for the next 7 years, and $2,000,000,000 for 13 years after that. However, during each year operating costs will be 30% of sales. In addition, every 10 years the firm will need to spend $65,000,000 to update its facilities. If the firm’s required rate of return is 16.50%, Compute the NPV of the project? Show your work. Round to the nearest $0.01. Show in Excel!!!

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 21BEA

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