Question

Need 300 words discussion, Identify and describe two (2) incremental cash flows from a proposed project such as expanding a product line or to launching a new product or service

Please don't rewrite already existing chegg answer

Answer 1

This discussion is on a new product which is introduced for an electronics company. The new product is a hand held tablet with an enhanced processor, a better display and a memory capacity with almost twice the size as its earlier versions. Added to this is the fact is that there are a lot of pre-installed analytics software which are preloaded in the system and thus it can be used to do state of the art machine learning in a powerful environment and which is also mobile. So the USP of the product is basically providing computing power which can rival robust computer systems while also providing mobility.

This innovation entailed an initial investment of $70 million dollar in research and development costs and another $30 million in promotional activities and working capital investment. The additional revenue that this product is expected to generate is around $100 million in the first year with a 5% increase in revenue each year. The life cycle of the product is ~ 7 years. The net margin of the product ~40% and with a tax rate of 30%, the net after tax incremental cash flow is expected to be ~ $28 million in the first year with an increase of 5% every year.

At these cash flows, the IRR of the project is