Good day. I have a home work assignment: the simon corporation is considering a new product. an
Question:
Good day.
I have a home work assignment:
the simon corporation is considering a new product. an outlay of $2 million is required for equipment to produce the new product, additional net working capital of $10 000 is required to support production and marketing. the equipment will be depreciated on a straight-line basis to a zero book value over eight years. although the depreciable life is eight years, the project is expected to have a productive life of only six years, and it will have a salvage value of zero at that time (removal cost = scrap value). revenues minus expenses for the first two years of the project will be $0.5 million per year but, because of competition, revenues minus expenses in years 3 through 6 will be only $0.4 million. the cost of capital for this project is 11% , and the relevant tax rate is 35%. compute the npv of simon's new product