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We tax shield, the present value should be in the same period as the initial investment (Year O), which also means that deprecation (ie. CCA)
We tax shield, the present value should be in the same period as the initial investment (Year O), which also means that deprecation (ie. CCA) should not be taken from the cash flows in subsequent years, since their tax shelter effects are already accounted for in the tax shield New Product Launch Ms. Morrison also wants you to evaluate it PCH should go forward with a new product launch for business and government enterprises. Over the past several years, PCH has spent over $50M on R&D on a new laptop and associated software. An additional investment of $20M is required before the product is ready to launch. There are 40 universities and 25 govemment ministries across Canada that are interested in entering ten-year contracts with PCH, which would lead to $75K in before tax cash flow from each client However, the interested parties are also existing clients of PCH, which means that the current contracts (with ten years remaining) that lead to SISK in before-tax cash flow per client would be nulified, Ms. Morrison wants you to evaluate the profitability of this investment after a ten-year period using the investment criteria of NPV and profitability index, 2 Investment 1 Acquisition of Camera Company Payback Period Discounted Payback Period Net Present Value 2 6 Internal Rate of Return 2 2 Profitability Index Investment 2: New Product Launch Net Present Value 4 Profitability Index 2 Marks Evaluation of Two Investment Proposals Stoder 06 Investment Recommend host Recomellation We tax shield, the present value should be in the same period as the initial investment (Year O), which also means that deprecation (ie. CCA) should not be taken from the cash flows in subsequent years, since their tax shelter effects are already accounted for in the tax shield New Product Launch Ms. Morrison also wants you to evaluate it PCH should go forward with a new product launch for business and government enterprises. Over the past several years, PCH has spent over $50M on R&D on a new laptop and associated software. An additional investment of $20M is required before the product is ready to launch. There are 40 universities and 25 govemment ministries across Canada that are interested in entering ten-year contracts with PCH, which would lead to $75K in before tax cash flow from each client However, the interested parties are also existing clients of PCH, which means that the current contracts (with ten years remaining) that lead to SISK in before-tax cash flow per client would be nulified, Ms. Morrison wants you to evaluate the profitability of this investment after a ten-year period using the investment criteria of NPV and profitability index, 2 Investment 1 Acquisition of Camera Company Payback Period Discounted Payback Period Net Present Value 2 6 Internal Rate of Return 2 2 Profitability Index Investment 2: New Product Launch Net Present Value 4 Profitability Index 2 Marks Evaluation of Two Investment Proposals Stoder 06 Investment Recommend host Recomellation
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