Question
An investment related to developing a new product is estimated to have the following costs and revenues in ''today's'' or ''time zero'' dollars. CO=$50,000 CI=$150,000
An investment related to developing a new product is estimated to have the following costs and revenues in ''today's'' or ''time zero'' dollars.
CO=$50,000 CI=$150,000 I=$200,000 -------------------- 1=$200,000
OC=$100,000 ------------------- OC=$100,000
0 1 2 5
A) Evaluate the project escalated dollar ROR if both capital costs and operating costs are estimated to escalate at 12% per year from time zero with income , escalating at 8 % per year.
b) Make constant dollar ROR analysis of case ''A '' assuming the rate of inflation for the next 5 years will be 6% per year.
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