X Company is planning to launch a new product. Market research, costing $130,000
ID: 2462711 • Letter: X
Question
X Company is planning to launch a new product. Market research, costing $130,000, has already been done indicating that the product will be successful for four years, but to insure success, the company plans to undertake an immediate advertising campaign that will also cost $130,000. New manufacturing equipment will have to be purchased - it will cost $310,000 and have a disposal value at the end of four years of $16,000. It is expected that profits from sales of the product will be $158,000 in each of the first two years and $102,000 in each of the last two years. Assuming a discount rate of 6%, what is the net present value of launching the new product?
Present Value of $1.00
Present Value of an Annuity of $1.00
A: $15,604 B: $17,633 C: $19,925 D: $22,515 E: $25,442 F: $28,750Explanation / Answer
Answer is F 28784 APPROXIMATE
cost of machine 310000 one time advertising expenses 130000 total capital outflow 440000 profit present value @6% present value of profit 1 158000 0.943396 149056.604 2 158000 0.889996 140619.438 3 102000 0.839619 85641.1669 4 102000 0.792094 80793.5537 16000 0.792094 12673.4986 468784.26 440000 NPV of the Project 28784.2604Related Questions
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