Question
Calculate the net present value (NNV) before tax of the investment (A) a factory, based on the following information: The investment cost is paid in
Calculate the net present value (NNV) before tax of the investment (A) a factory, based on the following information: The investment cost is paid in full in the first quarter and the factory price is 100000. the factory has a life of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0 Only basic jet packs should be manufactured 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 = 228- 0.007 * Q, where P is price and Q is the number of jet packs in demand. You are 5 players in the market (including you), and all quarterly sell the same number of jet packs at the price of 193 each. You produce as much as you sell. The costs associated with quarterly production at the factory are given at K = 158 * Q + 20000, where 158 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jet packs produced. The company has a return requirement (calculation rate) of 20% on the investment. Fill in the calculated NNV before tax in the field.
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