Question
1.RTY Company considers a new project that develops a new product. The firm has estimated that the project's NPV is $3.00 million, but this does
1.RTY Company considers a new project that develops a new product. The firm has estimated that the project's NPV is $3.00 million, but this does not consider that the newly developed product will reduce the revenues received on its product line.Particularly, the RTY estimates that if it develops the new product, RTY will lose $500,000 in after-tax cash flows during each of the next 10 years because of the cannibalization of its current product line. RTY's WACC is 10.00 percent. What is the net present value (NPV) of undertaking the new product after considering externalities?
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