Question 4:

Company spent 200,000 SR in equal amounts over two years developing a new product, launched after the two years. It will sell unit for 1,500 SR and has a unit cost of 1,300 SR. Sales quantities are expected of 100, 200, 400, 600, 800 units after launch. The company can achieve an investment return of 22% on capital after inflation.

• Do a DCF calculation: what is the payback?
• Compare it to a simple payback