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6.1 Now suppose you invest in both a factory and the research for the production of Green jetpacks. Look at the factory and research as
6.1 Now suppose you invest in both a factory and the research for the production of Green jetpacks. Look at the factory and research as a total investment. Calculate the net present value (NPV) before tax on the investment based on the following information:
- The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000.
- The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0
- Only green jetpacks should be produced at the factory throughout its lifetime.
- There is no investment in research to streamline production or material consumption.
- Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand.
- There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each.
- You produce as much as you sell.
- The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.
- The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.
Fill in the calculated NPV before tax in the field. A deviation of 5% from the facets are accepted.
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