Question
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)
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