Question
Entrepreneurial Inc. is evaluating a new product launch that will cost it $32667 to launch. The company projects it will generate $733228 in annual operating
Entrepreneurial Inc. is evaluating a new product launch that will cost it $32667 to launch. The company projects it will generate $733228 in annual operating cash flow at the end of each of the next 3 years, after which it will discontinue the product. The appropriate discount rate for the product is 12%.
If after the first year, the product is doing worse than expected, then the company projects annual cash flows will only be $423948 for the remaining two years of the project. What would be the value of the product line at that time (i.e. one year from now) in such a case?
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
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