A company is thinking about marketing a new product. Up-front costs to market and develop the product are $10.98 Million. The product is expected to generate profits of $1.83 million per year for 27 years. The company will have to provide product support expected to cost $265469 per year in perpetuity. Furthermore, the company expects to invest $30053 per year for 10 years for renovations on the product. This investing would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest rate is 6.74%. NOTE: Answer in $. If your answer is 220M, you must answer 220000000.0000. HINT. Compute the present value of all cash flows and then combine them.
A company is thinking about marketing a new product. Up-front costs to market and develop the product are $10.98 Million. The product is expected to generate profits of $1.83 million per year for 27 years. The company will have to provide product support expected to cost $265469 per year in perpetuity. Furthermore, the company expects to invest $30053 per year for 10 years for renovations on the product. This investing would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest rate is 6.74%. NOTE: Answer in $. If your answer is 220M, you must answer 220000000.0000. HINT. Compute the present value of all cash flows and then combine them.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company is thinking about marketing a new product. Up-front costs to market and develop the product are $10.98 Million. The product is
expected to generate profits of $1.83 million per year for 27 years. The company will have to provide product support expected to cost $265469
per year in perpetuity. Furthermore, the company expects to invest $30053 per year for 10 years for renovations on the product. This investing
would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest
rate is 6.74%.
NOTE: Answer in $. If your answer is 220M, you must answer 220000000.0000.
HINT. Compute the present value of all cash flows and then combine them.
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