York Bikes come up with a new mountain bike prototype and wishes to commence pilot production and test marketing. The pilot production and test marketing phase will last for 1 year and cost £708,701 now. Your management team believes that there is a 42% chance that the test marketing phase will be successful and that there will be sufficient demand for the new mountain bike. If the test marketing phase is successful then the firm can invest £3,500,000 in year 1 to build a plant that will generate expected annual after tax cash flows of £415,279 in perpetuity beginning in Year 2. If the test marketing phase is not successful then the firm can still go ahead and build a new plant, but the expected annual after tax cash flows would be only £300,000 in perpetuity beginning in Year 2. The firm has the option to sell the prototype mountain bike to a foreign competitor next year for £400,040. The firm’s cost of capital is 7.9% per annum. Compute the NPV of the project.

The financial manager of Tepung Berhad, Encik Danial, is considering a project which requiresan investment of RM53,000 in a machine. This machine in which will improve the performanceand production quantities of the company’s range of biscuits. At the end of the five-year period,this machine will be scrapped.Encik Danial expects that this project will lead to increased sales for the next five years as follows:Year Sales (‘000 units)1 8002 9003 1,0004 1,1005 1,200The selling price per unit is RM20. Labor and utilities costs are estimated to be RM8 and RM4 perunit respectively. The project requires an increase in net working capital of RM10,000 in the initialyear and will be fully recovered at the end of the project. The company’s required return oninvestment of 15%.Encik Danial thinks that the unit sales, selling price, labor, and utilities cost projections areaccurate to within 15%.Note: The calculation on depreciation, fixed cost and the effect on tax is ignored for this question.…

Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.77 million. Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $45,000 feasibility study to analyze the decision to buy the XC-750, resulting in the following estimates: • Marketing: Once the XC-750 is operational next year, the extra capacity is expected to generate $10.05 million per year in additional sales, which will continue for the 10-year life of the machine. • Operations: The disruption caused by the installation will decrease sales by $5.09 million this year. As with Billingham's existing products, the cost of goods for the products produced by the XC-750 is expected to be 72% of their sale price. The increased production will also require increased inventory on hand of $1.11 million during the life of the project, including year 0. • Human Resources: The…

ABC Co is considering the launch of a new widget. If the product goes directly to the market, there is a 60% chance of success. For $500,000, the manager can conduct a focus group to increase the probability of success to 65%. Alternatively, the manager can pay a consulting firm $750,000 to research the market and refine the product. The consulting firm successfully launches new products 70% of the time. If the firm successfully launches the widget, the payoff will be $8 million. If the product is a failure, the NPV is $0.   Calculate the expected NPV if the managers go directly to the market.