32) CGI Inc. is developing a new software platform, which requires an immediate investment of $780 000 and another $260 000 in three years. Net returms expected are $450 000 after two years, $313 000 after four years, and $889 000 after six years. However, if they simply upgrade their current platform, it requires an immediate investment of S400 000, another $260 000 after two years, and $340 000 after four years. Net refurns are Sl87 500 per year for 8 years Determine the net present value at 5.9%. Which project is preferable according to the net present value criterion?

32) CGI Inc. is developing a new software platform, which requires an immediate investment of $780 000 and another $260 000 in three years. Net returms expected are $450 000 after two years, $313 000 after four years, and $889 000 after six years. However, if they simply upgrade their current platform, it requires an immediate investment of S400 000, another $260 000 after two years, and $340 000 after four years. Net refurns are Sl87 500 per year for 8 years Determine the net present value at 5.9%. Which project is preferable according to the net present value criterion?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

32) CGI Inc. is developing a new software platform, which requires an immediate investment of $780 000 and another
$260 000 in three years. Net returns expected are S450 000 after two years, $313 000 after four years, and $889 000
after six years. However, if they simply upgrade their current platform, it requires an immediate investment of S400
000, another $260 000 after two years, and $340 000 after four years. Net refurns are Sl87 500 per year for 8 years
Determine the net present value at 5.9% Which project is preferable according to the net present value criterion?
Upgrade by $53 309
Upgrade by $277 277
New Software platform by $76 $99
O New Software platform by $53 309

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