Question
3) ICF, Inc., is thinking of developing a new no sugar ice cream. Development will take 7 years and the cost is $230,000 per year.
3) ICF, Inc., is thinking of developing a new no sugar ice cream. Development will take 7 years and the cost is $230,000 per year. Once in production, the Ice Cream is expected to make $350,000 per year for 10 years. The cash inflows begin at the end of year 7. Assuming the cost of capital is 10%:
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Calculate the NPV of this investment opportunity. Should the company make the investment?
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Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
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How long must development last to change the decision?
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Financial Markets and Institutions
Authors: Jeff Madura
11th Edition
1133947875, 9781305143005, 1305143000, 978-1133947875
