Question
Company X uses fermentation to produce a valuable industrial chemical. A startup company approaches X with a novel microbe that will increase the yield of
Company X uses fermentation to produce a valuable industrial chemical. A startup company approaches X with a novel microbe that will increase the yield of the chemical, so that profits will increase by an estimated $14.0k/mo. The startup company wishes to sell the rights to use the microbe for a seven-year period, at a price of $480k.
Engineers at company X estimate the increased production will entail additional maintenance, costing $12.0k in year 2, $14.0k in year 4, and $17.0k in year 6 of the project.
What would a cash flow diagram of the project, from the standpoint of Company X?
How can I calculate the present value of the project, assuming a 13.0% annual interest rate?
Using Excel, make a well-formatted graph of the project present value vs. interest rate, for interest rates ranging from 0 to 30% APR.
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