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Otobai Company Net Present Value

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