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A company is considering the launch of a new product: Investment required in equipment: 150000; Project life cycle: 5 years, Value of equipment in year
A company is considering the launch of a new product: Investment required in equipment: 150000; Project life cycle: 5 years, Value of equipment in year 6: 10000, Cash inflow as follows: 000 60 62 65 70 70 Year 2 3 4 5 An existing product can be discontinued immediately or retained instead of the new product for five years. If retained a cash inflow of 12000 p.a would be expected Discount rate (cost of capital) is 15% pa. Calculate the expected net present value of the new product Advise the company whether to launch the new product or retain the existing one
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