In this question, the initial cash outlay is not given. Hence, I cannot calculate the NPV. However, I have calculated the present value of the profits generated from the business in the Excel table given below:
|Total Market Share||2000000||2040000||2080800||2122416|
|New Product Market Share||120000||132000||145200||159720|
|Selling Price per product||20||25||30||35|
|Variable cost per product||5.00||5.25||5.51||5.79|
Revenue = Selling Price* Product Market Share
CoGS = Variable Cost*Product Market Share + Fixed Cost
Profit = Revenue - COGS
Formula used to calculate NPV = npv(0.07,Profits from Year 1 to Year 4), where 0.07 is the discount rate.
You are evaluating the launch of a new product. The total market size is 2,000,000 units in Year 1. The total market is expected to grow 2% each rear thereafter For the new product, you are expected...