Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ $4$ comma $900$ comma $000.$ The product is expected to generate profits of $ $1$ comma $100$ comma $000$ per year for $10$ years. The company will have to provide product support expected to cost $ $92$ comma $000$ per year in perpetuity. Assume all income and expenses occur at the end of each year.

a$.$ What is the NPV of this investment if the cost of capital is $5\mathrm{.}63\%?$ Should the firm undertake the$$ project? Repeat the analysis for discount rates of $1\mathrm{.}80\%$ and $15\mathrm{.}05\%,$ respectively.

b$.$ How many IRRs does this investment opportunity$$ have? $($Hint$$: Consider the two alternative discount rates we used in our analysis in part a$.)$

c$.$ Can the IRR rule be used to evaluate this$$ investment? Explain.

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are

$$4,900,000.$ The product is expected to generate profits of $$1,100,000$ per year for $10$ years. The company will have to provide

product support expected to cost $$92,000$ per year in perpetuity. Assume all income and expenses occur at the end of each year.

a$.$ What is the NPV of this investment if the cost of capital is $5\mathrm{.}63\%?$ Should the firm undertake the project? Repeat the analysis for

discount rates of $1\mathrm{.}80\%$ and $15\mathrm{.}05\%,$ respectively.

b$.$ How many IRRs does this investment opportunity have? $($Hint: Consider the two alternative discount rates we used in our analysis

in part a$.)$

c$.$ Can the IRR rule be used to evaluate this investment? Explain.