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    This posting addresses investment NPV and IRR calculations

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    Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product is $5 million. The product is expected to generate profits of $1 million per year for 10 years. The company will have to provide product support expected to cost $100000 per yr.in perpetuity. Assume all profits and expenses occur at the end of the year.

    a) What is the NPV of this investment if the cost of capitol is 6%. Should the firm undertaken the project? Repeat the analysis for the discount rate of 2% and 12%.
    b) How many IRR's does this investment opportunity have ?
    c) Can the IRR rule be used to evaluate this investment? Explain.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:22 am ad1c9bdddf
    https://brainmass.com/business/internal-rate-of-return/investment-npv-irr-calculations-395303

    Solution Preview

    Given the following MV information, what is the optimal allocation of care according to the Paretean criteria, when the marginal cost of care is constant at $100.
    Maximize the overall utility of all members without ...

    Solution Summary

    The solution provides the exact calculations for Innovation Company. Their NPV, IRR, and discount rate are thoroughly calculated.

    $2.19

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