Question
Extensive Enterprise Inc. is considering opening a new division to make iWidgets that it expects to sell at a price of $12,990 each in the
Extensive Enterprise Inc. is considering opening a new division to make iWidgets that it expects to sell at a price of $12,990 each in the first year of the project. The company expects the cost of producing each iWidget to be $7,100 in the first year; however, it expects the selling price and cost per iWidget to increase by 4% each year.
Based on this information, select the correct answer:
Selling price in year 4: 14,050 or 15,196 or 14,612 or 13,510?
Cost per unit in year 4: 7,384 or 7,987 or 8,306 or 7,679 ?
If a company does not take inflation into account when analyzing a project, the expected net present value (NPV) of the project will typically beLOWER or HIGHER?than the true NPV of the project.
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