What’s the payback period of the project?
What’s the profitability index of the project?
What’s the IRR of the project?
What’s the NPV of the project?
Should the project be accepted?
If the price needs to be adjusted, what’s the lowest the product could be offered and still have a positive NPV (keeping all other assumptions the same)
Marketing study $100,000
New PDA cost $200,000
Fixed Cost $2.1 million
Estimated sales per year:
Year 1 – $75,000
Year 2 – $85,000
Year 3 – $80,00
Year 4 – $70,000
Year 5 – $65,000
Unit price of new product $24
Equipment $10.5 million
Value of equipment in 5 years – $1.1 million
Networking Capital 22% No initial outlay for NWC
Corporate tax 30%
Required return 10%
