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- what will be the predicted monthly cash deficits and surpluses, and how much short - term financing will the company need in the coming year? what can be inferred from the pattern of cash deficits and surpluses, and the pattern of requirements for short-term financing?Suppose that you are working on a product development venture and your best guess about the cost and revenue is as follows: you expect to spend $2 million on inventories and marketing in the near future (so you can treat all the expenses as immediate cash outlays) but you expect to receive $2.3 million of revenue in two years. Note that the # is an expected amount that is an average of the optimistic scenarios and pessimistic scenarios. This is also simplified to make the set-up easy. What is your expected return on this venture (in terms of a per year rate of return? In other words, what is the IRR?Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
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