X Company has an opportunity to accept a special order that will result in immediate profit...
X Company has an opportunity to accept a special order that will
result in immediate profit of $54,000. The marketing manager
believes that if X Company accepts the order, the company will lose
regular customers. Specifically, she believes the effect will be
lost profits of $9,000 in each of the next 5 years.
Assuming a discount rate of 7%, what is the net present value of
accepting the special order?
Homework Answers
| Year | lost profits | PVAF @ 7% | DCF | |
| 1 - 5th year | 9,000.00 | 4.1002 | 36,901.80 | |
| Discounted lost profits | 36,901.80 | |||
| Immediate profit from special order=54000 | ||||
| Net present value of accepting order is 54000-36900 | ||||
| $ 17100 | ||||
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