Question
Rogers Enterprises is evaluating an investment opportunity that can be purchased for $55,000. Further product development will require contributions of $30,000 in Year 1 and
Rogers Enterprises is evaluating an investment opportunity that can be purchased for $55,000. Further product development will require contributions of $30,000 in Year 1 and $10,000 in Year 2. Returns of $20,000, $60,000, and $40,000 are expected in the three following years. A. Calculate the fair market value of future cash flows if its cost of capital is 8%(Compounded annually) (Rounded to nearest dollar) B. Based on the fair market value, should Rogers make the investment? C. By what amount will the current economic value of Rogers be increased or decreased if its proceeds with purchasing the investment for $55,000?
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