Your business is considering investing in a new product line that is expected to generate after-tax cashflows of $5.3 million dollars per year for 15 years. After 15 years, the patent on your product will expire and you believe that competition from generic brands of the product will diminish the viability of the product to the point that you will simply abandon it. The cost to shut down the project at the end of the 15-year run will be $15 million dollars. If your firm's overall cost of capital is 13%, would you recommend investing in the project if the cost to invest was $35 million?

Assume that you can negotiate some of the start up costs for the project. What is the most you would be willing to pay for investing in this product line?

If the overall cost of capital can be manipulated by altering your capital structure, what is the cost of capital that would be necessary to make this a viable project?

r =
		Millions
Year	Investment	OCF	Terminal CF	Total CF
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15