Question 7

Your CEO has asked you to evaluate whether the firm should launch a new product. Information provided by the consultant is as follows: $20,000 has been spent on doing a market survey, and this cost has been incurred regardless of whether the project is done or not. initial investment: $120,000 composed of $50,000 for the plant and $70,000 net working capital (NWC) Profits of $30,000 every year for 3 years after which the project ends and NWC is recovered. No salvage value for the plant For a discount rate of 9%, what is the NPV?