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Otobai Company Net Present Value

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Otobai Company in Osaka, Japan is considering the introduction of an electrically powered motor scooter for city use. The scooter project requires an initial investment of ¥17.0 billion. The cost of capital was assumed to be 10%. The initial investment can be depreciated on a straight-line basis over the 10-year period, and profits are taxed at a rate of 50%.

Consider the following estimates for the scooter project.

Market size 1.30 million
Market share 0.1
Unit price ¥ 600,000
Unit variable cost ¥ 560,000
Fixed cost ¥ 2.20 billion

What is the NPV of the electric scooter project? (Negative amount should be indicated by a minus sign. Enter your answer in billions. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net present value ¥ billion

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Solution Summary

The solution is provided in excel and show a step by step calculation of the net present value