Question
Products Inc. is analysing a 5 -year project that produces sales of 100 million per year (in years 1 through 5). Under the assumption that
Products Inc. is analysing a 5 -year project that produces sales of 100 million per year (in years 1 through 5). Under the assumption that accounts receivable are 10% of current year sales, the project has a positive NPV of 5 million. However, the management is concerned that customers will pay at a slower rate, which will put accounts receivable for the project at 20% of current year sales. The projects discount rate is 10%. The NPV of the project under this alternative scenario is closest to
a. 1.55 million b. 4 million
c. 2.7 million
d. Not enough information is provided
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started