The ABC Media Co. has just produced a new multimedia graphics chip which will co

Question

The ABC Media Co. has just produced a new multimedia graphics chip which will cost
$6,000,000 this year to put into production. They anticipate annual net cash flows of $3 million, $ 2
million, $1 million, $.5 million, and $.25 million over the following five years, respectively. The
company owners require a 15% return on their investment. What is the value of this investment to
the firm? (Hint: Finding NPV)
A) $-811,329.97
B) $-1,190,811.47
C) $-371,782.85
D) $ 68,129.47
E) $10,809, 189

Please give me the answer.

Explanation / Answer

NPV = -6000000 + 3000000/1.15 + 2000000/1.15^2 +  1000000/1.15^3 +  500000/1.15^4 +  250000/1.15^5

NPV =  $-811,329.97

Answer

A) $-811,329.97

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