Agate Marketing Inc. intends to distribute a new product. It is expected to produce net returns of $13,000 per year for the first four years and $11,000 per year for the following three years. The facilities required to distribute the product will cost $36,000, with a disposal value of $9,600 after seven years. The facilities will require a major facelift costing $10,000 each after three years and after five years. If Agate requires a return on investment of 15%, should the company distribute the new product? If NPV is negative your answer must include the negative sign. Net Present Value (NPV) = Should the decision be Accept or Reject?

Agate Marketing Inc. intends to distribute a new product. It is expected to produce net returns of $13,000 per year for the first four years and $11,000 per year for the following three years. The facilities required to distribute the product will cost $36,000, with a disposal value of $9,600 after seven years. The facilities will require a major facelift costing $10,000 each after three years and after five years. If Agate requires a return on investment of 15%, should the company distribute the new product? If NPV is negative your answer must include the negative sign. Net Present Value (NPV) = Should the decision be Accept or Reject?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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