Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5,200,000. The product is expected to generate profits of $1,300,000 per year for ten years. The company will have to provide product support expected to cost $93,000 per year in perpetuity. Assume all income and expenses occur at the end of each year.
a. What is the NPV of this investment if the cost of capital is 5.17% Should the firm undertake the project? Repeat the analysis for discount rates of 1.34% and 18.72% respectively.
b. How many IRRs does this investment opportunity have? (Hint: Consider the two alternative discount rates we used in our analysis in part a.)
c. Can the IRR rule be used to evaluate this investment? Explain.
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.94 million. The product is expected to generate profits of $ 1.17 million per year for ten years. The company will have to provide product support expected to cost $ 92000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 5.8 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.1 % and 17.3 %, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5,300,000.
The product is expected to generate profits of $1,200,000
per year for ten years. The company will have to provide product support expected to cost $92,000
per year in perpetuity. Assume all income and expenses occur at the end of each year.
a. What is the NPV of this investment if the cost of capital is 5.51%??
Should the firm undertake the? project? Repeat the analysis for discount rates of 1.60%
and 15.60%?, respectively.
b. How many IRRs does this investment opportunity? have? ? (Hint: Consider the two alternative discount rates we used in our analysis in part? a.)??
c. Can the IRR rule be used to evaluate this? investment? Explain.
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5.00
million. The product is expected to generate profits of $1.00
million per year for ten years. The company will have to provide product support expected to cost $100,000
per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 6.0%
Should the firm undertake the? project? Repeat the analysis for discount rates of 2.0%
and 11.0%?, respectively.
b. What is the IRR of this investment? opportunity???
c. What does the IRR rule indicate about this? investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.94 million. The product is expected to generate profits of $ 1.14 million per year for ten years. The company will have to provide product support expected to cost $ 94 comma 000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 6.1 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.2 % and 16.4 %, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment? a. What is the NPV of this investment if the cost of capital is 6.1 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.2 % and 16.4 %, respectively. If the cost of capital is 6.1 %, the NPV will be $ nothing. (Round to the nearest dollar.) Should the firm undertake the project? (Select the best choice below.) A. No comma because the NPV is less than zero. B. No, because the NPV is not greater than the initial costs. C. Yes comma because the NPV is equal to or greater than zero. D. There is not enough information to answer this question. When r equals 1.2 %, the NPV will be $ nothing. (Round to the nearest dollar.) When r equals 16.4 %, the NPV will be $ nothing. (Round to the nearest dollar.)
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5,300,000. The product is expected to generate profits of $1,000,000 per year for ten years. The company will have to provide product support expected to cost $92,000 per year in perpetuity. Assume all income and expenses occur at the end of each year.
a. What is the NPV of this investment if the cost of capital is 4.76%?
Should the firm undertake the project? Repeat the analysis for discount rates of 2.75% and 9.57%, respectively.
b. How many IRRs does this investment opportunity have?
(Hint: Consider the two alternative discount rates we used in our analysis in part a.)
c. Can the IRR rule be used to evaluate this investment? Explain.
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are
$4.95
million. The product is expected to generate profits of
$1.14
million per year for ten years. The company will have to provide product support expected to cost
$91,000
per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is
5.6%?
Should the firm undertake the project? Repeat the analysis for discount rates of
1.2%
and
16.4%,
respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.99 million. The product is expected to generate profits of $1.18 million per year for 10 years. The company will have to provide product support expected to cost $93,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 5.7%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.1% and 17.3%, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.98 million. The product is expected to generate profits of $ 1.02 million per year for 10 years. The company will have to provide product support expected to cost $ 91 comma 000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 6.2 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.7 % and 12.6 %, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.91 million. The product is expected to generate profits of $1.05 million per year for ten years. The company will have to provide product support expected to cost $95,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 6.1%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.6 % and 13.8 % respectively.
If the cost of capital is 6.1 %,the NPV will be $_____. (Round to the nearest dollar.)
If the cost of capital is 1.6 %,the NPV will be $_____. (Round to the nearest dollar.)
If the cost of capital is 13.8 %,the NPV will be $_____. (Round to the nearest dollar.)
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance