Question
A new marketing project requires initial research and development costs of $950,000 today with further investments of $190,000 and $142,500 in the fourth and sixth year, respectively. Initially the project will lose $380,000 in its first year and then earn profits of $427,500 for the next four years followed by profits of $209,000 in the last two years. At the end of the project, its capital goods can be sold for an estimated $95,000. If the cost of capital is 11%, should the marketing project be pursued?
95
likes476 views
Answer to a math question A new marketing project requires initial research and development costs of $950,000 today with further investments of $190,000 and $142,500 in the fourth and sixth year, respectively. Initially the project will lose $380,000 in its first year and then earn profits of $427,500 for the next four years followed by profits of $209,000 in the last two years. At the end of the project, its capital goods can be sold for an estimated $95,000. If the cost of capital is 11%, should the marketing project be pursued?
Andrea
4.583 Answers
The Net Present Value (NPV) of the marketing project is approximately -$2,855,197.38. Since the NPV is negative, the project is not financially viable according to this analysis, and it should not be pursued based on the current financial projections and the 11% cost of capital.
Frequently asked questions (FAQs)
What is the derivative of f(x) = 3x^2 - 2x + 5? (
+
What is the limit of (2x + 5) as x approaches infinity?
+
What is the multiplicative inverse of the complex number 3 + 4i?
+
New questions in Mathematics