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