5- Grobst Co., Ltd. has developed a new mechanical game called Nipper which Ttoreha total cost of $ 300,000. To evaluate the performance of commercial (commercial viability) of the nipper was the work of a survey of the market (market survey) worth $ 35,000. This poll suggests that Alnneber will have a lifetime market (in the market) for a period of 4 years, and that the possible Tiba Grobst Co., Ltd. Alnneber of $ 20 for each Napier. Alnneber demand for each of the four years that have been estimated are as follows:

Number Amperes			Probabilities of occurrence
11,000			0,3
14,000			0,6
16,000			0,1

If the decision was made to produce Alnneber, it will be the production and sale immediately. It requires the use of production machines owned by the company that bought the company three years ago for $ 200,000. If no production Alnneber, the machines will be sold for $ 85,000, knowing that there is no other use of the machines. If used to produce Alnneber, the machines will be sold for $ 35,000 at the end of the fourth year.

Each nipper will need to work one hour at a rate of $ 8 per hour. Any work that bears an estimated $ 10,000 in costs related to duplicate this rate at the end of four years

And raw materials will cost $ 6 for nipper and this will lead to increased fixed costs? To $ 15,000

It is believed that Grobst will not go ahead in the production of Alnneber, it could be sold the rights to another producer for $ 125,000 payable immediately. The cost of capital for Grobst is 12 per cent per annum (

Requirements:

on the basis of net present value, calculate and decide whether it should be limited Grobst production and sales continue). Ignore the existence of taxes and inflation) hypothesis

discussed and the values of the expected net present value approach in the decision-making process, with advantage and disadvantages