Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are...

Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the present value of the anticipated revenues? Acme uses an interest rate of 20%.

Acme Miracle projects good things for their new weight loss pill, LoseIt. Revenues this year are expected to be $1.1 million, and Acme believes they will increase 15% per year for the next 5 years. What is the equivalent annual amount for the anticipated revenues? Acme uses an interest rate of 20%.

Expert Solution


Loselt
Discount rate	0.2
Year	0	1	2	3	4	5
Cash flow stream	0	1.1	1.265	1.45475	1.6729625	1.923907
Discounting factor	1	1.2	1.44	1.728	2.0736	2.48832
Discounted cash flows project	0	0.916667	0.878472	0.841869	0.8067913	0.773175
NPV = Sum of discounted cash flows
NPV Loselt =	4.22
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor



Equvalent annuity(EAA)=	1.411082

Required rate =	0.2
Year	0.00%	1	2	3	4	5
Cash flow stream	0	1.411082	1.411082	1.411082	1.4110823	1.411082
Discounting factor	1	1.2	1.44	1.728	2.0736	2.48832
Discounted cash flows project	0	1.175902	0.979918	0.816599	0.6804988	0.567082
Sum of discounted future cashflows =	4.22
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

jeff jeffy answered 1 year ago

The producer of a weight-loss pill advertises that people who use the pill lose, after one...

The producer of a weight-loss pill advertises that people who use the pill lose, after one week, an average (mean) of 1.85 pounds with a standard deviation of 0.95 pounds. In a recent study, a group of 45 people who used this pill were interviewed. The study revealed that these people lost a mean of 1.77 pounds after one week. If the producer's claim is correct, what is the probability that the mean weight loss after one week on this...

A researcher is interested in the effects of a new weight loss supplement. Participants in this...

A researcher is interested in the effects of a new weight loss supplement. Participants in this double-blind study are randomly assigned to either a group that receives the new supplement or a group that receives a placebo. Participants are weighed before starting the program. After 6 weeks of taking either the new supplement or the placebo, participants return to the lab to be weighed. Provide the appropriate null and alternative hypotheses. Determine which type of analysis would be appropriate to...

A team of researchers has developed a new weight loss supplement. They want to know if...

A team of researchers has developed a new weight loss supplement. They want to know if patients who use the new supplement for four weeks lose any weight. The supplement has some minor side effects including mild headaches and achiness. If the researchers obtain evidence of weight loss they will proceed to produce the supplement commercially and sell it for a large profit. If they do not obtain evidence of weight loss, the project will be ended. State the null...

A team of researchers have developed a new weight loss drug. They want to know if...

A team of researchers have developed a new weight loss drug. They want to know if patients who use the new drug for two weeks lose any weight. The drug has some minor side effects including mild headaches and achiness. If the researchers obtain evidence of weight loss they will proceed to produce the drug commercially and sell it for a large profit. If they do not obtain evidence of weight loss they will end the project. [70 points] What...

An investigator wants to test the effectiveness of a new weight loss medication at reducing BMI...

An investigator wants to test the effectiveness of a new weight loss medication at reducing BMI (kg/m2). Suppose the following table represents the results from a SRS of individuals enrolled in the study. Assume a normal approximation is acceptable. (α=.05)(6 points) Patient BMI Pre-Test (kg/m2) BMI Post-Test (kg/m2) A 30.5 26.5 B 32.8 28.5 C 35.6 28.4 D 34.7 25.7 E 33.9 29.4 A) What type of test design is this? B) Write our your null and alternative hypotheses. H0:µd=____ ,Ha:...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $54,000 in plant and equipment. a. What is the initial investment in the product? Remember working...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2 30,000 3 20,000 4 5,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $49,000 in plant and equipment. Required: a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000 2...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000 2 40,000 3 30,000 4 10,000 Thereafter 0 Expenses are expected to be 30% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $81,000 in plant and equipment. b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line...

Revenues generated by a new fad product are forecast as follows year Revenues 1 $50,000 2...

Revenues generated by a new fad product are forecast as follows year Revenues 1 $50,000 2 40,000 3 20,000 4 10,000 Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $40,000 in plant and equipment. Required: a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment are depreciated...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $55,000 2...

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $55,000 2 45,000 3 25,000 4 15,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $55,000 in plant and equipment. Required: a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment...

Question