ZuoTi.Pro
Question

Entrepreneurial Inc. is evaluating a new product launch that will cost it $32667 to launch. The...

Entrepreneurial Inc. is evaluating a new product launch that will cost it $32667 to launch. The company projects it will generate $733228 in annual operating cash flow at the end of each of the next 3 years, after which it will discontinue the product. The appropriate discount rate for the product is 12%.

If after the first year, the product is doing worse than expected, then the company projects annual cash flows will only be $423948 for the remaining two years of the project. What would be the value of the product line at that time (i.e. one year from now) in such a case?

Select one:

a. $802473

b. $716494

c. $683827

d. $1037521

e. $1239193

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Value of product line one year from now will be equal to the present value of future cash flows. Since the cost was incurred at year 0 and cash flows of year 1 have already been generated, these will not be taken into account.

Hence, the value of product line one year from now = 423,948*PVAF(12%,2 years)

= 423,948*1.69005

= $716,494

i.e. b

0 0
Add a comment
Know the answer?
Add Answer to:
Entrepreneurial Inc. is evaluating a new product launch that will cost it $32667 to launch. The...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating...

    Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $9 million for the next 8 years. The discount rate for this project is 14 percent for new product launches. The initial investment is $39 million. Assume that the project has no salvage value at the end of its economic life.    a. What is the NPV of the new product? (Do not round intermediate calculations and enter your answer in...

  • Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating...

    Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $8.4 million for the next 8 years. The discount rate for this project is 12 percent for new product launches. The initial investment is $38.4 million. Assume that the project has no salvage value at the end of its economic life. a. What is the NPV of the new product? (Do not round intermediate calculations and enter your answer in dollars,...

  • Comparing Investment Criteria Consider two mutually exclusive new product launch projects that Nagano Golf is considering....

    Comparing Investment Criteria Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 15 percent Project A: Nagano NP-30. Professional clubs that will take an initial investment of $735,000 at Year 0. For each of the next 5 years (Years 1-5), sales will generate a consistent cash flow of $239,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B:...

  • Comparing Investment Criteria Consider two mutually exclusive new product launch projects that Nagano Golf is considering....

    Comparing Investment Criteria Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 15 percent. Project A: Nagano NP-30. Professional clubs that will take an initial investment of $735,000 at Year 0. For each of the next 5 years (Years 1-5), sales will generate a consistent cash flow of $239,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B:...

  • ________________________________________ Consider two mutually exclusive new product launch projects that Nagano Golf is...

    ________________________________________ Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both projects is 13 percent. Project A: Nagano NP-30. Professional clubs that will take an initial investment of $570,000 at Time 0. For the next 5 years sales will generate a consistent cash flow of $205,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B: Nagano NX-20. High-end amateur clubs that...

  • Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount...

    Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 16 percent. Project A: Nagano NP-30. Professional clubs that will take an initial investment of $670,000 at Year O. For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $305,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B: Nagano NX-20. High-end...

  • Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount...

    Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 16 percent. Project A: Nagano NP-30. Professional clubs that will take an initial investment of $740,000 at Year 0. For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $340,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B: Nagano NX-20. High-end...

  • Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rat...

    Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 12 percent.    Project A: Nagano NP-30.    Professional clubs that will take an initial investment of $700,000 at Time 0.    Next five years (Years 1–5) of sales will generate a consistent cash flow of $300,000 per year.    Introduction of new product at Year 6 will terminate further cash flows from this project.    Project B: Nagano NX-20.    High-end amateur clubs that...

  • Tall Trees, Inc. is using the modified internal rate of return (MIRR) when evaluating projects. The...

    Tall Trees, Inc. is using the modified internal rate of return (MIRR) when evaluating projects. The company is able to reinvest cash flows received from the project at an annual rate of 11.30 percent. What is the MIRR of a project if the initial costs are $1,397,200 and the project life is estimated as 9 years? The project will produce the same after-tax cash inflows of 594,400 per year at the end of the year.

  • ABC, Inc. is about to launch a new product. The firm can use either a proven...

    ABC, Inc. is about to launch a new product. The firm can use either a proven technology or a new (experimental) method. The proven technology will produce a certain cash flow of $24M. In contrast, the cash flow from the new technology are uncertain. If the new technology works, it will produce a cash flow of $28M next year. If it is unsuccessful, it will produce a zero cash flow next year. The probability of success is 0.8 and is...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT