Question

You manage a software company that requires internet bandwidth to produce output. Currently your company is using 87% of its capacity, but is considering an expansion to utilize the additional bandwidth. Doing so will require $13,000 in additional expenditures per year forever, and generate $36 additional profits each year forever. The expansion will require a one time cost of $100,000. What is the NPV of undertaking this expansion project? Assume a cost of capital of 14.5%. ________________________

Your production of widgets is governed by an average production cost equation, avg. cost = $1,000 + $5,000/(x+1000) where x is the number of goods produced. If you can sell 6,000 units at a price $3.47, what is the firm's total profit?___________________

Carry out calculations to at least 4 decimal places. Enter percentages as whole numbers. Example: 3.03% should be entered as 3.03. Do not include commas or dollar signs in numerical answers.

Answer 1

Part A:

Part B:

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