Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mypetrock.com is considering launching a new paid service on its website. To manage the new service, the company generate revenues of $50,000 in year one,

Mypetrock.com is considering launching a new paid service on its website. To manage the new service, the company generate revenues of $50,000 in year one, $35,000 in year two, and $25,000 in year three. The company will incur costs of goods sold of 70% of sales and will need to cover operating expenses (not including depreciation) of $1,000 per year, regardless of sales volume. The computer equipment, which will require an immediate capital expenditure of $12,000, will be depreciated over the 3-year life and will have no salvage value. Mypetrock.com is extremely profitable and faces a tax rate of 40%. Assuming a cost of capital of 15%, what is the Net Present Value of this opportunity? (5 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting For Risk In The Nhs

Authors: P. Fenn, S. Diacon, R. Hodges, P. Watson

2nd Edition

1859713491, 978-1859713495

More Books

Students also viewed these Accounting questions

Question

=+3. What is its quality?

Answered: 1 week ago

Question

=+Where does the focus of labor relations lie? Is it collective

Answered: 1 week ago