Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What is the answer for this question ? The Circle developed an innovative technology to profile their users such that ads could be better fitted

What is the answer for this question ?

The Circle developed an innovative technology to profile their users such that ads could be better fitted to each one. The implementation of this technology costs 70 million. This amount will remain constant in the years to come. If implemented, sales will increase by 10.5 million per year, in perpetuity. The respective costs will increase by 6.6 million per year, also in perpetuity. Assume that the cost of capital and the risk-free rate are both 4% per year. However, this innovative technology incorporates some degree of risk. Actually, in one year, sales will be either 15 million or 8 million with equal probability. Calculate the expected NPV (in millions) of the project if it is postponed by one year. (Ignore taxes)

a) 27.50

b) 50.48

c) 67.31

d) 39.81

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance A Contemporary Application of Theory to Policy

Authors: David N Hyman

11th edition

9781305474253, 1285173953, 1305474252, 978-1285173955

More Books

Students also viewed these Finance questions

Question

8. In what ways does IT change OBs and procedures?

Answered: 1 week ago