Question

30,804 DO 5121,080 EO $151,350 FO $189,188 Sp Company is planning to launch a new product. A market research study, costing year, indicating that the product will be successful for the next four years. Profits from sale A market research study, costing $100,000, was conducted last to be $177,000 in each of the first two years and $114.000 in each of the last two years. an immediate advertising campaign that will cost $80,000. New $400,000; it will have zero disposal value at the end of tl present value of launching the new product? valte at the end of the four years. Assuming a discount rate of 5%, what is the net 10. AO $30,215 BO $35,351 CO $41,361 DO $18,302 EO $56,619 FO 506 next four years. Profits from sales of the product are expected each of the last two years. The company plans to undertake New manufacturing equipment will have to be purchased for

Answer 1

	Now	1	2	3	4
Manufacturing Equipment	-400000
Advertising	-80000
Annual Profits		177000	177000	114000	114000
Total cash flows	-480000	177000	177000	114000	114000
X PV factor 5%	1	0.952	0.907	0.864	0.823
Present value of cash flows	-480000	168504	160539	98496	93822
Net Present value	41361
Option C $41,361 is correct