Question
Company XYZ has developed the concept of a new product, from preliminary budgetary estimate to final design ready for implementation. The development has required
Company XYZ has developed the concept of a new product, from preliminary budgetary estimate to final design ready for implementation. The development has required an initial investment at the beginning of the activity, which lasted six months before implementation and beginning of production. At completion of implementation and beginning of production the CEO wants to estimate the expected PV of the investment, he/she has the following data: | Capital for development Development period Capital for Implementation Anticipated sales revenues Anticipated O&M cost Project Life Salvage Value P1 = $30,000 0.5 years P2 = $2,000,000 A r = $250,000/yr plus G r = $20,000 = $2,000 A om= $25,000/yr plus G om = 15 years F = 20% of invested capital Worth of Capital availability for the Company i= 7.35% QUESTIONS: 1) Draw the Cash Flow Diagram of this investment. 2) Write the expression for deriving PV using generic i and n. Assume the beginning of production as the reference period.
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