Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A wind turbine company is thinking of developing a new turbine, the XP9. The company estimates that creating the XP9 will require an initial

image

 

A wind turbine company is thinking of developing a new turbine, the XP9. The company estimates that creating the XP9 will require an initial investment of $125,000 today, $250,000 of engineering related costs at the end of the first year, and $49,000 of marketing costs at the end of the second year in order to be successful. However, the company estimates that sales will be increased in years 3 through 10 by $75,000 each year. The company's current cost of capital is 15 percent. a. What is the net present value of the XP9? b. What is the net present value if sales are only increased by $50,000 in years 3 through 10? c. Using the $75,000 estimate of the increase in sales, how does the net present value calculated in part a change if the cost of capital is increased to 18 percent?

Step by Step Solution

3.39 Rating (152 Votes )

There are 3 Steps involved in it

Step: 1

a NPV of XP9 with 75k annual sales increase Cash Flows In... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation The Art and Science of Corporate Investment Decisions

Authors: Sheridan Titman, John D. Martin

3rd edition

133479528, 978-0133479522

More Books

Students also viewed these Finance questions

Question

Let v = (2, 5) and w = (3, 2). Find the length of v + w.

Answered: 1 week ago

Question

1. Define attachment.

Answered: 1 week ago

Question

Irreversibility is the inability to imagine undoing a process.

Answered: 1 week ago