Solution:
Computation of NPV - X Company | ||||
Particulars | Period | Amount | PV factor | Present Value |
Cash outflows: | ||||
Initial investment (Equipment + Advertising) | 0 | $420,000.00 | 1 | $420,000 |
Present Value of Cash outflows (A) | $420,000 | |||
Cash Inflows | ||||
Year 1 | 1 | $163,000.00 | 0.943 | $153,709 |
Year 2 | 2 | $163,000.00 | 0.890 | $145,070 |
Year 3 | 3 | $103,000.00 | 0.840 | $86,520 |
Year 4 | 4 | $103,000.00 | 0.792 | $81,576 |
Present Value of Cash Inflows (B) | $466,875 | |||
Net Present Value (NPV) (B-A) |
$46,875 |
X Company is planning to launch a new product. A market research study, costing $100,000, was conducted last year,...
X Company is planning to launch a new product. A market research study, costing $100,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $163,000 in each of the first two years and $103,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $90,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $130,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $151,000 in each of the first two years and $109,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $90,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $150,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $163,000 in each of the first two years and $ 105,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $77,000. New manufacturing equipment will have to be purchased...
X Company is planning to launch a new product. A market research study, costing $150,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $151,000 in each of the first two years and $107,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $78,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $170,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $151,000 in each of the first two years and $109,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $87,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $130,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $157,000 in each of the first two years and $114,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $91,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $130,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $167,000 in each of the first two years and $102,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $92,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research study, costing $100,000, was conducted last year, indicating that the product will be successful for the next four years. Profits from sales of the product are expected to be $174,000 in each of the first two years and $120,000 in each of the last two years. The company plans to undertake an immediate advertising campaign that will cost $88,000. New manufacturing equipment will have to be purchased for...
X Company is planning to launch a new product. A market research
study, costing $150,000, was conducted last year, indicating that
the product will be successful for the next four years. Profits
from sales of the product are expected to be $154,000 in each of
the first two years and $100,000 in each of the last two years. The
company plans to undertake an immediate advertising campaign that
will cost $87,000. New manufacturing equipment will have to be
purchased for...