NRG, Inc. plans to launch a new

MBA 605-Class Activity #02 Chapter No. 08-Fundamentals of Capital Budgeting 10:2019 146 46 Nome Mohamad Elftane Problem. 01: NRG, Inc. plans to launch a new line of enre drinks. The marketing expenses associated with launching the new product will generate operating losses ors500 million next year for the product. NRO expects to eam pre- tax income of 57 billion from operations other than the new energy drinks next year. NRO pays a 39% tax rate on its pre-tax income A) What will NRG owe in taxes next year without the new energy drinks? B) What will it owe with the new energy drinks? Solutions Problem. 02: Suppose NRG's new energy drink line will be housed in a factory that the company could have otherwise rented out for $900 million per year. How would this opportunity cost affect NRG's incremental earnings next year? Solution: 1 Page