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not sure if i did the 1st oart right either You are CEO of Rivet Networks, maker of ultra-high performance network cards for gaming computers,
not sure if i did the 1st oart right either
You are CEO of Rivet Networks, maker of ultra-high performance network cards for gaming computers, and you are considering whether to launch a new product. The product, the killer X3000, will cost $901,000 to develop up front (year 0), and you expect revenues the first year of 5806,000, growing to $1.53 million the second year, and then declining by 40% per year for the next 3 years before the product is fully obsolete In years 1 through 5, you will have fixed costs associated with the product of $95,000 per year, and variable costs equal to 50% of revenues a. What are the cash flows for the project in years through 5? b. Plot the NPV profile for this investment using discount rates from 0% to 40% in 10% increments c. What is the project's NPV if the project's cost of capital is 9.5%? d. Use the NPV profile to estimate the cost of capital at which the project would become unprofitable that is, estimate the project's IRR 0 1 2 3 $ 0 $ 612000 97920 Revenues YOY growth Variable costs % of sales Fixed costs 806,000 $ 1,530,000 89.8% 403000 765000 50% 50% 95000 95000 (40%) 306000 244800 (40%) 122400 (40%) 48960 50% 95000 50% 95000 50% 95000 Investment (901.000) (901,000) Total cash flows 308000 670000 211000 27400 -46040 b. Plot the Profile for this investment using discounts from 0% 100% 10 crement The graph depicting the comet NIP prettie is Select the best choice below) NPV Patie NV Proble 100 c. What is the project's NPV if the project's cost of capital is 9.5%? The NPV is 5 (Round to the nearest dollar.) Step by Step Solution
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