Question
Neptune Biometrics, despit its promising technology, is having difficulty generating profits. Having raised $85 million in an initial public offering of its stock early in
Neptune Biometrics, despit its promising technology, is having difficulty generating profits. Having raised $85 million in an initial public offering of its stock early in the year, the company is poised to introduce new product, an inexpensive fingerprint door lock. If Neptune engages in a promotional campaign costing $55 million this year, its annual after-tax cash flow over the next five years will be only $1 million. If it does not undertake the campaign, it expects its after-tax cash flows to be -$15 million annually for the same period. Assuming the company has decided to stay in its chosen business, is this campaign worthwhile when the discount rate is 8%? Why or why not?
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